Emerging-Risks-In-The-EU-The-Insurance-Market.Pdf

Public Disclosure Authorized 2019 Public Disclosure Authorized

Emerging Risks in the EU – The Insurance Market Public Disclosure Authorized

BACKGROUND INFORMATION AND DATA

Public Disclosure Authorized FINANCE, COMPETITIVENESS & INNOVATION | EUROPE AND CENTRAL ASIA REGION Contents1

EUROPEAN SUPERVISORY BODIES ...... 2 European Insurance and Occupational Pensions Authority (EIOPA) ...... 2 European Systemic Risk Board (ESRB) ...... 2 SUPERVISION AT THE EU LEVEL ...... 3 Insolvency ...... 4 Insurance Guarantee Schemes ...... 5 INSURANCE ASSOCIATIONS ...... 6 International Association of Insurance Supervisors (IAIS) ...... 6 International Bureau of Assurance and Reassurances (BIPAR) ...... 6 Global Federation of Insurance Associations (GFIA) ...... 6 Insurance Europe ...... 7 Association of Mutual Insurers and Insurance Cooperatives in Europe (AMICE) ...... 7 COUNTRY STUDIES ...... 7 Bulgaria ...... 7 Romania ...... 16 Croatia ...... 24 Poland ...... 34 Italy ...... 42 Spain ...... 52 Portugal ...... 63 Greece ...... 72 REFERENCES ...... 79

1 This document provides background information and data for the presentation “Emerging Risks in the EU – The Insurance Market”. The information presented in this document is for internal use only.

EUROPEAN SUPERVISORY BODIES There are two key supervisory bodies responsible for monitoring insurance activities within the EU, both of which created in 2010 as part of a new EU-level supervisory structure. These bodies are EIOPA and ESRB. European Insurance and Occupational Pensions Authority (EIOPA) The European Insurance and Occupational Pensions Authority (EIOPA) is a financial regulatory institution that replaced the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS). It was established in consequence of the reforms to the structure of supervision of the financial sector in the European Union. This reform was initiated by the European Commission. Before and during the financial crisis in 2007 and 2008, the European Parliament has called for a move towards more integrated European supervision in order to ensure a true level playing field for all actors at the level of the European Union and to reflect the increasing integration of financial markets. As a result, the supervisory framework was strengthened to reduce risk and severity of future financial crises. EIOPA is part of a European System of Financial Supervisors that comprises three European Supervisory Authorities, one for the banking sector, one for the securities sector and one for the insurance and occupational pensions sector, as well as the European Systemic Risk Board. The objective of EIOPA is to protect the public interest. Among its tasks in the field of insurance is to contribute to the establishment of high-quality common regulatory and supervisory standards and practices in the European Union. EIOPA's powers include issuing guidelines and recommendations and developing draft regulatory and implementing technical standards. EIOPA is also entitled to provide opinions to the European Parliament, the Council of the European Union and the European Commission on insurance related issues. One of the main aims of EIOPA for the coming years is the preparation of the new supervisory regime for insurance and reinsurance undertakings and particularly the conduct of all the necessary work for the implementation of the EU Directive on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II). EIOPA is also advising the European Commission on the revision of the Insurance Mediation Directive and will support the development of industry training standards in this area. In this respect, EIOPA is working on the development of common disclosure rules, and regulation of the sale of Packaged Retail Investment Products (PRIPs). EIOPA also provides input into the European Commission's policy-making with regards to Insurance Guarantee Schemes (IGS) with a view to contributing to the assessment of the need for a European network of national Insurance Guarantee Schemes which is adequately funded and sufficiently harmonized. European Systemic Risk Board (ESRB) The ESRB monitors high-level risks to the EU financial system and issues warnings and recommendations. It has no binding powers but was conceived as a “reputational body” whose prestige should be sufficient to ensure that its opinions and decisions influence supervisors and policymakers.

SUPERVISION AT THE EU LEVEL Following recommendations made by the Committee on Economic and Monetary Affairs on a stronger European supervisory structure and as a reaction to the global financial crisis that began in 2008, the European Parliament called for major changes to be made to the supervision of financial services. As a result, the European System of Financial Supervision (ESFS) came into operation on 1 January 2011. The ESFS is made up of the European Systemic Risk Board (ESRB), the European Insurance and Occupational Pensions Authority (EIOPA), the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA) and national supervisors of the EU member states. The purpose of the ESRB is to monitor high-level risks to the EU financial system and issue warnings and recommendations. It has no binding powers but operates with the logistical and administrative support of the European Central Bank (ECB). It was conceived as a “reputational body” whose prestige should be sufficient to ensure that its opinions and decisions will influence supervisors and policymakers. The ESRB is currently chaired by the head of the ECB.

Micro-prudential supervision is the responsibility of the European Supervisory Authorities: EIOPA, EBA and ESMA. Among other things, they draft regulatory technical standards and implement technical standards which are adopted by the European Commission (as delegated or implementing acts) and issue guidelines and recommendations.

The Solvency II directive has as its objective the harmonization of the regulatory framework in member states and the creation of a prudential supervision regime that affords maximum protection to policyholders. The main provisions of the legislation include the establishment of a common set of procedures for the authorization and supervision of (re)insurance undertakings in member states, the attribution to the competent authorities of the home member state of responsibility for the financial supervision of those undertakings, including the business written through branches and by way of freedom to provide services, and the obligation of member states to ensure that supervisory authorities have the necessary means and powers to carry out the supervision and enforce the law.2 Group

2 Article 30 of the Solvency II directive establishes that the financial supervision of (re)insurance undertakings, including that of the business they pursue either through branches or under the freedom to provide services, shall be the sole responsibility of the home Member State. Financial supervision shall include verification, with respect to the entire business of the (re)insurance undertaking, of its state of solvency, of the establishment of technical provisions, of its assets and of the eligible own funds, in accordance with the rules laid down or practices followed in the home Member State under provisions adopted at Community level. If the supervisory authorities of the Member State in which the risk is situated or the Member State of the commitment (host Member State) have reason to consider that the activities of a (re)insurance undertaking might affect its financial soundness, they shall inform the supervisory authorities of the home Member State of that undertaking. The supervisory authorities of the home Member State shall determine whether the undertaking is complying with the prudential principles laid down in this Directive. According to Article 33, Member States shall provide that, where an insurance undertaking authorized in another Member State carries on business through a branch, the supervisory authorities of the home Member State may, after having informed the supervisory authorities of the host Member State concerned, carry out themselves on-site verifications of the information necessary to ensure the financial supervision of the undertaking. The authorities of the host Member State concerned may participate in those verifications. Regarding the cooperation across supervisors, Article 159 states that every insurance undertaking shall inform the competent supervisory authority of its home Member State, separately in respect of transactions carried out under the right of establishment and those carried out under the freedom to provide services, of the amount of the premiums, claims and commissions, by Member State. The supervisory authority of the home Member State shall

3 supervision, which applies to all European Economic Area (EEA) insurers and reinsurers that are part of a larger group, involves elements of the supervisory regime applicable to individual (re)insurers complemented by reporting requirements in connection with group exposures and intra-group arrangements.

On 20 September 2017, the European Commission proposed to reinforce the supervisory framework applicable to the financial markets in the EU. The proposed changes will give EIOPA a more enhanced role in the supervision of internal solvency models which may be used by (re)insurers, instead of the standard formula, in the calculation of their solvency capital requirement. It will be able to ensure information sharing by national regulators and settle disputes between member state regulators.

Under the provisions of the directive, the European Commission may decide if a third country’s regime are equivalent to those prescribed under Solvency II. The assessment for equivalence applies to reinsurance, solvency calculation and group supervision. The equivalence decisions that have been taken by the European Commission are:

- Full equivalence: Switzerland and Bermuda - Provisional equivalence for solvency calculation: US, Australia, Brazil, Canada, Mexico and Japan - Temporary equivalence for reinsurance: Japan

The US and the EU also signed an agreement covering the exchange of information between regulators, group supervision and reinsurance in September 2017. Known as a “covered agreement”, one of its key benefits is that those US and EU (re)insurers operating in each other’s markets will be subject only to oversight by regulators in their home territory. Insolvency Directive 2001/17/EC was introduced in 2001 to provide rules to ensure the coordination of reorganization measures taken to preserve or restore the financial health of an insurer and on the winding-up of insurance operations. The directive did not seek to harmonize legislation throughout the Community and winding-up proceedings remained the prerogative of each individual member state’s national legislation. The Solvency II directive repealed the directive 2001/17/EC and recast the winding- up and insolvency rules without significant changes with effect from 1 January 2016. The new directive established that decisions on reorganization or winding-up proceedings are the prerogative of the home member state of the insurance undertaking. In cases where the undertaking has branches in other member states, all branches are subject to a single winding-up proceeding initiated in the home member state.3 In cases where the head office of a branch is located beyond EU borders, the host member state is

submit this information within reasonable time and in aggregate form to the supervisory authorities of each of the Member States concerned, upon their request. 3 Article 269 establishes that only the competent authorities of the home Member State shall be entitled to decide on the reorganization measures with respect to an insurance undertaking, including its branches. The reorganization measures shall be governed by the laws, regulations and procedures applicable in the home Member State. Reorganization measures taken in accordance with the legislation of the home Member State shall be fully effective throughout the Community without any further formalities, including against third parties in other Member States, even where the legislation of those other Member States does not provide for such reorganization measures or alternatively makes their implementation subject to conditions which are not fulfilled.

4 regarded as the home member state; if there is more than one branch in the EU, each branch must be treated independently.

Member states may choose to give absolute precedence to insurance claims or to grant them a status preceded only by claims on salaries, social security and rights in rem. Different types of insurance claims may be treated in different ways but there may be no discrimination on grounds of nationality or residence.

In its discussion paper on resolution funding and insurance guarantee schemes released on 30 July 2018, EIOPA recommended a minimum level of harmonization across member states in respect of insurance guarantee schemes, an approach that would ensure the interests of policyholders are protected and financial stability of the insurance market. Insurance Guarantee Schemes For many years there have been discussions with a view to the introduction of a directive to introduce obligatory guarantee schemes in all member states, aimed at protecting policyholders in the event of the failure of an insurer. In 2008, the European Commission carried out a public consultation and the regulatory authorities were mostly in favor of mandatory guarantee schemes in all member states.

In 2010, the Commission issued the White Paper on Insurance Guarantee Schemes to ensure full and fair protection for policyholders and beneficiaries, avoid distortions of competition, reduce adverse incentives, ensure cost efficiency, and enhance market confidence and stability. The Commission proposes to create a coherent and legally binding framework by means of a new directive, the main proposals being as follows:

- A guarantee scheme will be established in each member state, covering life and non-life insurers (but not reinsurers or pension funds) - The geographical scope of these guarantee schemes will be harmonized on the “home country” basis - The scope of the schemes will be limited to the cover of individuals and selected legal entities such as micro and small businesses - The schemes will be pre-funded from a suggested annual contribution level of 0.12% of gross written premium; complementary post-event funding calculated in accordance with the risk profiles of the contributors may also be considered along with funding from other sources such as external credit arrangements and reinsurance - The Commission will accept the principle that claimants under the scheme should bear part of any loss provided that the appropriate level of cover for policyholders and beneficiaries is guaranteed

In an analogous manner, Article 273 regulates the opening of winding-up proceedings. According to this article, only the competent authorities of the home Member State shall be entitled to take a decision concerning the opening of winding-up proceedings with regard to an insurance undertaking, including its branches in other Member States. A decision concerning the opening of winding-up proceedings of an insurance undertaking, including its branches in other Member States, adopted in accordance with the legislation of the home Member State shall be recognized without further formality throughout the Community and shall be effective there as soon as the decision is effective in the Member State in which the proceeding are opened.

In May 2012 EIOPA published a report on the role of insurance guarantee schemes in the winding-up procedures of insolvent insurance undertakings in the EU/EEA. The report highlights the diversity of the schemes across the EU and lack of harmonization.

INSURANCE ASSOCIATIONS International Association of Insurance Supervisors (IAIS) Established in 1994, the IAIS is a voluntary membership organization of insurance supervisors and regulators from more than 200 jurisdictions, constituting 97% of the world's insurance premiums. It is the international standard-setting body responsible for developing and assisting in the implementation of principles, standards and other supporting material for the supervision of the insurance sector. The IAIS mission is to promote effective and globally consistent supervision of the insurance industry in order to develop and maintain fair, safe and stable insurance markets for the benefit and protection of policyholders and to contribute to global financial stability.

The IAIS Multilateral Memorandum of Understanding (MMoU) is a global framework for cooperation and information exchange between insurance supervisors. It is a statement of its signatories’ intent to cooperate in the field of information exchange, as well as procedures for handling information requests. The MMoU was adopted by the IAIS Executive Committee on 15 February 2007 to promote close cooperation and information exchange amongst insurance supervisors since these are essential conditions for supervising insurers in an effective and strengthened manner. The MMoU provides a tool for this cooperation and information exchange between signatory authorities regarding the supervision of insurance companies. International Bureau of Assurance and Reassurances (BIPAR) BIPAR is the European Federation of Insurance Intermediaries. It groups 51 national associations in 30 countries. Through its national associations, BIPAR represents the interests of insurance agents and brokers and financial intermediaries with the European authorities.

BIPAR’s primary mission is to promote a European regulatory environment in which intermediaries can prosper and that, at the same time, ensures fair competition, an adequate level of consumer protection and a sound insurance market. BIPAR is recognized as the representative body for European insurance and financial intermediaries by all relevant European and international institutions and authorities. BIPAR is formed by national insurance associations from several European countries.4 Global Federation of Insurance Associations (GFIA) GFIA was established in 2012 as the first formal representative body for the global insurance industry. It had been preceded by an informal network, the International Network of Insurance Associations (INIA), which had been active since 2008. GFIA represents its 42 member associations, which represent insurers and reinsurers in 61 countries, on issues of common interest.

4 This report is based on the analysis of direct insurance undertakings and excludes reinsurance undertakings as well as insurance intermediaries. Therefore, this document does not report the national associations representing the specific interests of those groups (such as ADECOSE in Spain, PRBAR and UNSICAR in Romania, and ACB and AIBA in Italy).

The GFIA is a non-profit association established to represent national and regional insurance associations that serve the general interests of life, health, general insurance and reinsurance companies and to make representations to national governments, national regulators and others on their behalf. The federation was established to increase industry effectiveness in providing input to international regulatory bodies and to contribute more effectively to the international dialogue.

Formal national and regional insurance associations are eligible to become a member of the GFIA if they:

o Represent life, health, or general insurance/reinsurance companies o Serve their members’ general interest, and advocate on their behalf to national and international regulators o Have no conflict of interest with the GFIA Insurance Europe Insurance Europe is the European insurance and reinsurance federation. Through its 34 members – the national insurance associations – Insurance Europe represents all types of insurance and reinsurance undertakings (such as mutual, SMEs, pan-European companies). Insurance Europe represents undertakings that account for around 95% of total European premium income. Association of Mutual Insurers and Insurance Cooperatives in Europe (AMICE) AMICE was created in 2008 and its prime purpose is to ensure that the voice of the mutual and cooperative insurance sector in Europe is heard and that the interests of its members are taken into account in securing a level playing field for all insurers in Europe regardless of their legal form.

AMICE provides a platform for mutual and cooperative insurers of all sizes to combine resources and expertise, exchange experiences across national borders and discuss key issues and concerns relating to planned legislative and regulatory changes and developments.

In the 28 EU Member States, the mutual and cooperative sector has a market share of over 30% representing close to EUR 400 billion in insurance premiums. With close to 100 direct members representing about 750 more insurers indirectly through 5 national associations, AMICE speaks for a significant part of the insurance sector.

AMICE’s supreme governing body is the General Meeting composed of all members. The General Meeting, upon proposal of the Nomination Committee, elects the President, the Vice-Presidents, the Treasurer and the other Board Members.

Its budget is almost exclusively funded by contributions from members. AMICE receives no funding from national or international public institutions.

COUNTRY STUDIES Bulgaria I. Characteristics of the Insurance Market

In 2017, the number of licensed insurers in Bulgaria was 15 in the life insurance sector and 27 in the non- life insurance sector (also one re-insurance company).

In 2016, 34 insurers apply the European regulations on insurance Solvency II and have the right of access to the European Union and the European Economic Area market (single market). Whereas five insurers operate without the right of access to the single market and report under Solvency I. The number of insurance companies with headquarters in an EU Member State operating in Bulgaria through the right of establishment was 13.

The banking sector is by far the largest group within the financial system, as it accounts for close to 87% of the system’s assets. Insurance companies and pension funds account for close to 4% and 10% of the financial system assets, respectively (Bulgaria FSAP, 2017).

- Non-life Insurance:

Non-life insurance gross written premium at the end of 2017 amounted to BGN 1,763 million. Insurance penetration was 1.8% and insurance density amounted to BGN 250 per capita.

The main share in the activities of non-life insurers was that of motor vehicle insurance (69.8%). The share of the top four insurers with the highest premium income under this type of insurance was 56.4%. Other relevant activities of non-life insurers were those of property (15.7%) and healthcare (6.3%).

The main share in the structure of the investment portfolio of non-life insurance companies was that of sovereign bonds (61%), followed by investments in land and buildings (13%), and investments in shares and other variable-income securities and stakes in investment funds (11%).

At the end of 2017 there were 8 non-life insurers registered as branches in Bulgaria under the freedom of establishment. The FSC also maintains a register of notifications received from insurers from EU Member States of their intention to carry out insurance business in Bulgaria on a freedom of services basis, though few of these companies are doing more than simply declaring intent and perhaps serving one or two group contracts.

The only insurance company that is still majority owned by the state in the Bulgarian Export Insurance Agency (BAEZ), which was established in 1998 to write export credit guarantee insurance. The company had a market share of 0.31% in the non-life sector in 2017.

The market share of the top-5 non-life insurance companies was 55.24%. The leading non-life insurance companies in 2017 ranked by premium income are:

The following table shows some of the largest groups and their member companies:

Group Member companies

Life insurers Non-life insurers Significant other group companies Chimimport / CCB Group CCB Life Armeec CCB Sila (pension), CCB Bank, Saglasie Pension Company Lev Ins, Health Insurance Lev Corporation JZI (Life Insurance Institute) Pension Insurance Institute, Capital Leasing, ASBG Ins Broker Institute Eurohold Bulgaria Plc, Euroins Euroins, Euroins Health Euroins Life Eurolease Auto Insurance group Insurance Vienna Insurance Group Bulstrad Life VIG Bulstrad VIG Doverie Pension company, VIG Services* Allianz Bank Bulgaria, Allianz Bulgaria Pension Company, Allianz Leasing Allianz Holding Allianz Bulgaria Life Allianz Bulgaria, Energia Bulgaria KBC Group DZI Life DZI General Insurance CIBANK Generali Group Victoria, Generali Insurance GP Re, Generali Zakrila Medical & Dental Centre UNIQA Ins Group UNIQA Life UNIQA Insurance n/a Groupama Group Groupama Life Groupama Insurance n/a Saglasie Life Insurance Web Finance Holding Saglasie Insurance Saglasie Pension Company, Texim Bank, Saglasie Ins Broker Company

- Life Insurance:

The gross written premium achieved by life insurers in 2017 was BGN 396 million, which represented a 18% share of the total Bulgarian insurance market. Density of life insurance in 2017 amounted to BGN 56 per capita and insurance penetration was 0.40%. The number of contracts in effect was 855,000.

The main share in life insurance activities was that of the traditional life insurance and annuities (63%), unit-linked life insurance (16%), and sickness insurance (10%).

The main share in life insurers’ investment portfolio was that of securities issued and guaranteed by the state (52%), investments in shares and other variable yield securities and shares in investment funds (9%), and investments in shares and stakes of subsidiary, joint and associate undertakings (9%).

AXCO reports the following table showing the invested assets (BGN mn) by life insurance companies:

The market share of the top-5 life insurance companies was 84.04%. The leading life insurance companies in 2017 ranked by premium income are:

Foreign-owned companies dominate the market. In 2017 over 90% of life premiums were written by insurers under foreign control. At the end of 2017 there were 3 European life insurers registered as branches in Bulgaria. There are no reported examples of foreign life insurers actively working and selling in Bulgaria under the freedom to provide services, only freedom of establishment.

Market developments:

- There are concerns in the local market after a Cyprus based insurer, Olympus Insurance, which underwrote MTPL insurance in the Bulgarian market via a branch, had its license revoked by its

home regulator and has been placed into liquidation. At the time of preparing the AXCO report, it was not clear which guarantee fund, Cyprus or Bulgaria, would be responsible for settling any claims. Market estimates were that the Cypriot entity had a 10% market share of the Bulgarian MTPL market. As part of the fall-out from this issue the Bulgarian insurance regulator resigned. - The FSC has approved the acquisition of Tokuda Health Insurance by Saglasie Insurance. The regulator has also approved the merger of Euroins Insurance Group (EIG) into EIG Re, formerly HDI Zastrahovane. - In August 2017, Nadezhda Insurance had its license suspended, pending insolvency proceedings, by the FSC for failing to set proper technical reserves and achieve minimum capital requirements. - In March 2018, the FSC gave approval to DZI Life Insurance to acquire full ownership of UBB- MetLife. - Generali Bulgaria ceased writing life business.

II. Supervisor

The Financial Supervision Commission (FSC) was established in 2003 under the Financial Supervision Commission Act. It is an autonomous institution, independent from the executive authority, which reports its activity to the National Assembly of the Republic of Bulgaria. The FSC is responsible for supervising the non-banking financial sector consisting of capital markets, insurance and reinsurance companies, insurance intermediaries and pension insurance companies.

The primary mission of the institution is to assist through legal, administrative and informational means for the maintenance of stability and transparency on the non-banking financial sector, and to ensure the protection of the consumers of financial services and products.

The FSC is financed by fees and levies on supervised entities in accordance with Article 27 of the Financial Supervision Commission Act. The FSC used to be partly funded by the state budget but this changed following an amendment to the Financial Supervision Commission Act. Penalties imposed on firms are passed to the state, rather than contributing to funding.

Decree no. 239, in force effective 1 January 2018, updated the supervisory levies and fees payable by entities overseen by the FSC. The decree defines both one-off and regular amounts payable by insurers, reinsurers and brokers such as license application fees and annual supervisory levies. The current fixed levies payable by insurance market participants to the FSC include the following:

- Insurer with access to the single EU market: BGN 140,000 ($85,522) - Insurer without access to the single EU market: BGN 20,000 ($12,218) - Reinsurer: BGN 140,000 ($85,522) - Insurance broker: BGN 5,000 ($3,054)

III. Cross-border Supervision

The FSC shall exercise ongoing supervision over the insurers and reinsurers seated in the Republic of Bulgaria regarding their overall operations performed on the territory of the Republic of Bulgaria (article 576 of the Insurance Code). The supervision over the financial status shall be exercised by the FSC also regarding their operations performed on the territory of the member states under the conditions of the right of establishment or of the freedom to provide services. An insurer in Bulgaria which performs

13 operations in another member state shall submit to the FSC quarterly and annual reports separately on the insurance policies concluded under the conditions of the right of establishment or of the freedom to provide services and on the insurance premiums amount, as well as on the amount of the claims and commissions specified by the member state and lines of business. The Deputy Chairman of the FSC shall provide the reports received by the insurer in summary form to the competent authorities of the respective member states upon their request.

The ongoing supervision over the insurers from Member States performing operations in the Republic of Bulgaria under the conditions of the right of establishment and of the freedom to provide services shall be exercised by the FSC regarding their operations on the territory of the Republic of Bulgaria, except for the supervision over their financial condition which shall be exercised by the competent authorities of the Member State at their seat. The insurers and reinsurers seated in a Member State shall present to the FSC the documents and information needed with regard to supervision.5

The ongoing supervision over insurers from a third country performing operations in the Republic of Bulgaria through a branch office, shall be exercised by the FSC regarding the overall operations of the branch in the country. When the insurer is from a third state, it shall have the right to perform insurance operations on the territory of Bulgaria only through the establishment of a branch. An insurer from a third state shall be subject to the state insurance supervision exercised by the FSC over insurers with a seat of business in the country.6

In general, the supervision by the FSC shall be based on ongoing assessment of the risks that insurers are exposed to and shall be forward looking. The FSC shall exercise continuous supervision over the operations of the insurers and reinsurers (article 577).

The supervision over the financial status shall include control as regards the overall operations of the insurer, over its solvency, the technical reserves formed, the assets used for their coverage and the eligible own funds (article 578).

The FSC, advising in advance the competent authority of the home Member State of the branch office, may conduct on-site inspections, severally or jointly with said authority. Likewise, a competent authority of a Member State may conduct on-site inspections at the branch offices registered on the territory of the Republic of Bulgaria of insurers with a seat of business in such member state.

IV. International Cooperation

The FSC is a member of the International Association of Insurance Supervisors – IAIS, and a member- founder of the International Organization of Pension Supervisors – IOPS. The FSC signed the MMoU of the IAIS on 2016. Representatives of the Commission are involved in the forums of these organizations, as well as in the task forces which prepare the best practices in the field of supervision over the investment, insurance and social insurance markets. FSC is also a member of the Francophone Institute for Financial Regulation.

5 EEA insurers are subject to the solvency requirements and financial reporting of the supervisory authority in their home country, not the Bulgarian FSC. 6 Third country insurers are subject to reporting and supervision with the FSC in Bulgaria, unless they have branches in other EEA countries and have elected to be supervised in one of the other EEA jurisdictions.

Another major priority of the FSC, even as early as its establishment in 2003, has been the cooperation with all states on the Balkan Peninsular. This cooperation involves both the conducting of trainings on the FSC’s side under different projects, directed to strengthening of the administrative capacity of the relevant institutions in the other states, as well as in initiatives for conclusion of Memorandums for exchange of information with the states in the region. Furthermore, FSC has always expressed its willingness to assist upon each request for arranging visits for experience exchange and training of other supervisory authorities from the near countries.

V. Association of Bulgarian Insurers (ABZ)

The association of insurers, established in 1992, is an open formation and every licensed insurer agreed on its Statute could become freely and voluntarily a member. The main objective of the Association is to protect the shared interests and rights of its members and to assist them in carrying out their insurance activities. At the present, the members of the ABZ are 30 companies, divided into two main branches - general insurance and life insurance. These companies account for 93% of the Bulgarian insurance market and represent a noteworthy part of the country's economy and their assets in December 2017 amounted to EUR 2.4 billion. The companies in the insurance sector are among the most important buyers of government securities. In particular, ABZ’s members stand out as a significant institutional investor with BGN 1.4 billion holdings in Bulgarian and foreign government securities.

The decisions of ABZ are based on the consensual approach and are independent of the state institutions. The Association strives to react against protectionism in the foreign market, unfair government support for competitors abroad, any measure (legal, regulatory, administrative) or absence of measure by a Member State that is against the EU law, inefficiency or poor performance of the regulator, and regulatory/supervisory arbitrage.

According to AXCO “The ABZ attempts to act as a technical forum and political lobby, though its effectiveness is limited by its low staffing levels and the divergence of interests among its members”.

VI. Insurance Guarantee Scheme

The Guarantee Fund is composed by the “Fund for Uninsured Motor Vehicles” and the “Security Fund”. The former guarantees the receivables of the damaged persons from uninsured motor vehicles. The Security Fund, established in 2007, guarantees the receivables in the case of bankruptcy of insurers with a seat of business in the Republic of Bulgaria or from a third state through a branch registered in the Republic of Bulgaria. The Security Fund covers claims against insolvent insurance companies under life insurance policies and compulsory MTPL (and compulsory passenger PA for public transport).7

All insurers with a seat of business in the Republic of Bulgaria and the insurers from a third state which have registered a branch in the Republic of Bulgaria, offering compulsory third party liability insurance to motorists, compulsory accident insurance of the passengers, and life insurance are obligated to make contributions into the Guarantee Fund. Branches operating in Bulgaria under EU regulations governing “freedom of establishment” as well as EU insurers writing business under “freedom of service” are not liable to collect and remit this levy

7 PA=Personal Accident.

The financial resources of the Security Fund shall be raised from annual contributions by the insurers, income from investment of the financial resources of the Security Fund, amounts received by the Security Fund from the property of the insurer in bankruptcy, revenues from receivables on recourse claims, and other sources. Each insurer shall make an annual contribution amounted not less than:

- for any person insured under every risk insurance contract under Section I of Annex No. 1, ensuring cover in the respective year – BGN 0.70 each - for any person insured under all the other insurance contracts under Section I of Annex No. 1, ensuring cover in the respective year – BGN 1.00 each but not more than 2 per cent of the amount of the due annual premium - for each motor vehicle in connection with which insurance under Item 10.1, Section II, Letter "A" of Annex No. 1 has been concluded for the respective year - BGN 1.50 each - for every seat except the driver’s seat for which a compulsory accident insurance of the passengers for the respective year has been concluded – BGN 0.20 each

If the financial resources in the Fund are not sufficient to cover its liabilities, the deficiency will be covered in one of the following ways: use of loans, obliging insurers to make in advance annual contributions or supplementary contributions, or increasing the annual contributions.

In case of insolvency, the Security Fund reimburses up to BGN 196,000 ($119,731) any one insurer for life insurance products.

As at 31 December 2017, the funds of the Compensation Fund amounted to BGN 53 million. In 2017, the Compensation Fund paid out guaranteed insurance receivables to users of insurance services amounting to a total of BGN 4,000.

The bodies of the Guarantee Fund are: board of the Guarantee Fund, management board, and two executive directors. The board of the GF consists of all insurers which are obligated to make contributions thereto. Romania I. Characteristics of the Insurance Market

The insurance market in Romania continued its growth trend in 2017. There were 31 insurance companies authorized and regulated by the Financial Supervisory Authority (ASF), which subscribed gross premiums in the amount of 9.7 billion lei. Of these, 6 were composites, 17 were non-life and 8 were life. There were also 11 branches authorized in other EU member states conducting their activity (non-life and life) in Romania under the freedom of establishment. Among these branches there are Aegon, Cardif and Metropolitan Life.

The top 10 local insurers accounted for almost 89% of the total premiums underwritten in 2017.8 Despite insurance legislation for mutual companies (in the legal form), there were none present in the Romanian market in 2015 (AMICE, 2018). However, there were 3 subsidiaries of foreign mutual/cooperative insurers in 2015.9

8 Data on market concentration come from https://www.romania-insider.com/romania-insurance-market-2017-2/ 9 Although law no. 237/2015 permits insurance undertakings in the form of mutual insurance societies, there is no legislation governing the operations of such companies. In June 2018 the government approved a draft law to allow

In 2017, assets of insurance companies accounted for 2.33% of the Romanian GDP. There were 12,422,480 non-life insurance contracts and 1,867,988 life insurance contracts in force. Insurance penetration was 1.13% of GDP and insurance density was lei 494 ($122.32) per inhabitant.

The proportion of total assets in the financial sector which are held by insurance companies was 2.5% of GDP, compared to assets in the banking sector which amount to 52% of GDP (Romania FSAP, 2018).

- Non-life Insurance:

Gross written premiums for general insurance amounted to a value of 7.7 billion lei in 2017. Density of non-life insurance in 2017 amounted to $93.24 per capita and insurance penetration was 0.86% of GDP.

Of the total gross written premiums for non-life insurance, the highest shares are held by “civil liability for the use of land vehicles” (50%), “land vehicles, excluding railway rolling stock” (25%), and “fire and natural disasters” (13%). In 2017, the share of these classes was 88% of total gross written premiums for non-life insurance business. The insurance market is dominated by compulsory Motor Third Party Liability (MTPL).

In 2015, foreign based shareholders represented 89.53% of the registered share capital of the insurance companies in the market. According to AXCO “it is believed that the percentage of foreign ownership would be at least at this level in the period 2016-2018, especially given that the bankruptcies of Astra and Carpatica would have reduced the local ownership share”. The structure of the Romanian insurance market has changed radically since the country joined the EU, with firstly market consolidation via acquisition from significant foreign insurers such as Vienna Insurance Group, Generali and Groupama, which have all brought their professional experience to the market and access to capital. The second phase has been the financial collapse of many locally based insurers as years of under-reserving and artificially low pricing have caught up with them in a time when Solvency II has required more consistent approach across the market as a whole.

The top-5 non-life companies’ aggregate market share in 2017 was 70.02%. City Insurance was reported to be the market leader with a 16.33% market share. Other major insurers are Allianz-Tiriac, Euroins Romania, Vienna Insurance Group companies (ASIROM and Omniasig) and Groupama.

for mutual insurance companies to operate in Romania. The draft was sent to the Chamber of Deputies for approval in October 2018.

Regarding locally owned insurers, during 2016 Astra, Carpatica, Forte and LIG had their licenses withdrawn and were in the bankruptcy and liquidation process while Euroins and City Insurance came through the financial recovery procedures, with City Insurance attracting investment from German investors. FATA opted for voluntary liquidation and left the market in June 2016.

The only state-owned company now active is the export credit insurer Eximbank, which it is subject to a special law (law no. 96/2000).

The following table shows some of the largest groups and their member companies:

Group Member companies

Life insurers Non-life insurers Significant other group companies

Vienna Insurance Group BCR Life Insurance, ASIROM VIG* Omniasig VIG, ASIROM VIG* Numerous across Austria and CEE

Generali Group Generali Romania* Generali Romania* Numerous worldwide

Groupama Group Groupama Insurance* Groupama Insurance* Numerous worldwide

Allianz Allianz-Tiriac Insurance* Allianz-Tiriac Insurance* Numerous worldwide UNIQA Insurance Group UNIQA Life UNIQA Insurance Numerous across Austria and CEE

- Life Insurance:

Gross written premiums by life insurance reached about 2 billion lei, which represented a share of 20.8% of the total Romanian insurance market. Density of life insurance in 2017 amounted to $24.41 per capita and insurance penetration was 0.23% of GDP.

Regarding the main activities carried out by life insurers, death benefits business accounted for 69% of total life income, followed by unit-linked and annuity business (27%). All other items of income remained insignificant.

The main share in life insurers’ investment portfolio was that of government securities and treasury bills issued by EU member states as well as securities traded on regulated market and equity securities in the open-end investment funds. AXCO reports the following table showing the invested assets (RON mn) by life insurance companies:

The top-5 life companies had an aggregate market share of 75.13% in 2017. The leading life insurance companies in 2017 ranked by premium income are:

According to AXCO, there have been reports in the media that Ergo (part of the wider Munich Re Group) is looking to exit from a number of territories in eastern Europe, including Romania.

The Romanian life market is highly concentrated, mainly because of the high market share of the leading company NN Life Insurance (36.52%). The main market participants in the life sector are reported in the following table:

The structure of the life market has been transformed since 2008 by foreign insurer acquisition and market consolidation:

- VIG acquired BCR (2008) - Groupama acquired Asiban, BT, and OTP Garancia (2008) - MetLife acquired Aviva Romania Life and Pensions (2012) - Aegon acquired Achmea’s life insurance and pension portfolios in Romania (2013-14) - Metropolitan Life and Alico merged and are now operating under the Metropolitan Life name (2013), and in 2016 converted to branch status with head office being in Dublin.

Market developments:

- The ASF announced in a press release dated 20 October 2017, that for the first time all insurers met the minimum capital requirements and the solvency capital requirements as at 30 June 2017 under the Solvency II regime. This is a marked contrast to the situation over the previous 24 months when Solvency II was being ushered in and a number of high profile insolvencies were a cause of great concern to all market participants. - There have been reports in the media that Ergo is looking to exit from a number of territories in eastern Europe, including Romania. - On 31 October 2017, the ASF approved the merger of BCR Asigurari de Viata VIG and AXA Life Insurance, whereby AXA Life Romania portfolio is absorbed into BCR by way of portfolio transfer. - In August 2015 the ASF initiated insolvency proceedings for Astra Asigurari which was subsequently declared bankrupt. A similar process was experienced by the locally based insurer Carpatica. - In 2015 Ergo acquired Credit Europe.

II. Supervisor

Established in 2013, the Financial Supervisory Authority (ASF) is an autonomous, specialized, with legal status, independent, self-financed administrative authority, exercising its duties by taking over and reorganizing all duties and powers of the National Securities Commission (CNVM), the Insurance Supervisory Commission (CSA) and the Private Pension System Supervisory Commission (CSSPP). The ASF’s powers and duties are established by the Parliament of Romania in the law no. 237/2015.

The ASF aims at promoting the stability of the insurance activity and protecting the rights of policyholders. To do so, the ASF exercises authorization, regulation, supervision, and control powers over insurers, reinsurers, and insurance intermediaries conducting their activity in or from Romania. All insurance entities must have a public disclosure policy including the publication of a solvency and financial condition report at least once a year. The ASF requires annual risk management reports, six-monthly financial reports, quarterly reports on the assets covering technical reserves, and monthly reports on outstanding loss reserves and liquidity. Branches operating in Romania under freedom of establishment are required to submit financial statements of the “mother” company instead of annually audited accounts for the local entity.

The ASF is fully financed from its own extra-budgetary revenues (article 18 of the Emergency Ordinance no. 93/2012 on the establishment, organization and operation of the ASF)10. The ASF is funded by the three sectors it oversees. From the insurance sector, revenue sources include: license fee applications; supervisory levies of 0.4% on non-life premium (excluding MTPL), 1% MTPL, 0.3% life and 0.1% commission income; fines and penalties raised from sanctions against insurers and/or individual managers. Supervisory levies do not apply to EEA insurers writing business in Romania under freedom of services or freedom of establishment.

The ASF is managed by a board of 9 members, which are appointed by the Romanian parliament. The board ultimately answers to the Romanian parliament.

10 https://asfromania.ro/en/legislation/asf-legislation/2305-emergency-ordinance-no-93-2012

III. Cross-border Supervision

According to article 7 of the law no. 237/2015, the ASF shall supervise the business pursued by undertakings in the territory of Romania and in the territory of the other Member States under the right of establishment and freedom to provide services, through verification of their state of solvency, establishment of technical provisions, of its assets and of the eligible own funds. ASF’s supervision shall be based on a prospective and risk-based approach. As part of the supervisory review process, ASF shall verify the regular reports and additional information sent by undertakings and carry out inspections at their premises.

In terms of cross-border cooperation, article 12 establishes that ASF may exchange information with the supervisors of the other Member States. ASF shall conclude cooperation agreements providing for the exchange of information with the supervisors of third countries, providing that the information is subject to guarantees of professional secrecy and that it shall be intended only for the performance of the supervisory task.

- ASF’s powers as supervisor of the Home Member State (Article 13):

Insurers pursuing business within the territory of other Member States shall inform the ASF of the amount of the premiums, claims and commissions, separately for non-life insurance and life insurance and broken down by lines of business and Member State (Articles 112 and 113). Following requests from the supervisors of the host Member States, ASF shall send them, in aggregate form, the information received from insurers.

Where an undertaking authorized in Romania carries on business in another Member State through a branch, ASF shall notify the supervisor of the host Member State of its intention to carry out an inspection at the premises of that branch, directly, through intermediaries or with that supervisor (article 9).

- ASF’s powers as supervisor of the Host Member State (Article 14):

ASF may request from the supervisors of the home Member State the information concerning the business the insurers authorized in that Member State carry on in the territory of Romania under the right of establishment and freedom to provide services.

Where an undertaking authorized in another Member State carries on business in Romania through a branch, ASF may participate in the inspection at the premises of that branch initiated by the supervisor of the home Member State.

IV. International Cooperation

The ASF is a signatory of the MMoU of the IAIS. Moreover, the ASF has signed a memorandum of understanding on cooperation and exchange of information in the field of insurance supervision with:

- Insurance Supervisory Agency of Macedonia (February 2011). - Bundesanstalt fur Finanzdienstleistungsaufsicht (July 2007). - State Inspectorate for Insurance Supervision and Nestatal Pension Funds in Moldova (November 2006). - National Commission for the Regulation of the Financial Markets in Ukraine (November 2006). - Austrian Finance Ministry and Austrian Financial Market Authority in Austria (June 2005).

- Insurance Supervisory Agency of Slovenia (February 2005). - Bulgarian Financial Supervision Commission (April 2004). - Insurance Supervision Commission and Pension Funds of Poland.

V. National Association of Insurance and Reinsurance Companies (UNSAR)

Established in 1994, the National Association of Insurance and Reinsurance Companies in Romania (UNSAR) is a non-governmental, apolitical, independent entity, with non-lucrative status. Its objective is to grow and consolidate the collaboration and cooperation in the field of insurance.

The members of the Association are insurance and reinsurance companies registered in Romania, which pay a membership fee to the Association. Eligibility for membership is also open to insurance and reinsurance undertakings from other Member States, which operate in Romania under the right of establishment or freedom to provide services. In 2016, there were 22 UNSAR members, which took up over 90% of the insurance market (by gross written premiums). When it was first established, a number of insurers refused to join, apparently out of reluctance to contribute to its insurance education activities.

The supreme governing body of UNSAR is the General Assembly of the Union’s members. The UNSAR chairman is provided by the company appointed by the General Assembly to exercise this function.

UNSAR’s objective is to represent, manage and defend the professional, economical, and social interest of its members in front of various bodies, public or private organizations, both in Romania and abroad. The association funds an institute for insurance education and training.

VI. Insurance Guarantee Scheme

The Parliament of Romania adopted the law no. 213/2015 on the Policyholder Guarantee Fund.

The purpose of the Policyholder Guarantee Fund is to protect insurance creditors from the consequence of any insurer’s insolvency. The Fund covers all classes of life and non-life insurance policies. The Fund is only liable for claims that cannot be met from the bankrupt insurer’s assets and only comes into play once bankruptcy proceedings have been concluded.

The Fund may conclude cooperation arrangements with insurance guarantee schemes of other states and with other stakeholders in the development of the protection of policyholders.

The insurers authorized by the ASF, including their branches pursuing business in the territory of another European Union Member State, must contribute to the Fund. The Policyholder Guarantee Fund contribution does not apply to EEA insurers writing Romanian business from abroad on a freedom of services basis. However, EEA insurers writing business in Romania under freedom of establishment are subject to the Policyholder Guarantee Fund contribution.

The financial resources of the Fund come from insurers’ contributions, interest and penalties on late payment of the contributions by insurers, amounts from using the available resources, amounts from the recovery of the Fund’s receivables, and loans from credit institutions through the issue of securities of the Fund. It is funded by a levy of 0.4% of life insurers’ collected annual gross premiums and 1% of non-life insurers’ collected annual premiums. The contributions owed to the Fund by insurers shall be paid monthly into the Fund’s account, in national currency.

The available resources of the Fund shall be invested in interest-bearing instruments, at credit institutions, money market instruments, government securities and securities of the local public administration, and investment established by the legislation in force. The investment strategy of the Fund’s resources shall have in view the safe investment thereof, with a view to mitigate risks, ensure efficiency and support liquidity.

Payment by the Fund of insurance claims has a coverage level of RON 450,000 per insurance creditor of the bankrupt insurer. For non-life lines of business, the fund pays 50% of outstanding claims as at the date bankruptcy proceedings are initiated, reduced to 25% in the case of credit and guarantee and financial loss.

The Fund is managed by a Board of Directors consisting of 3 members appointed by the ASF’s Board and 2 members appointed by the Ministry of Public Finance. Croatia I. Characteristics of the Insurance Market

The Croatian insurance market is characterized by a 2.54% premium share in the GDP, $306 insurance premium per inhabitant, and life insurance premium share of 33% in total premiums.11 Gross written premium by insurance companies in Croatia amounted to EUR 1,214 million in 2017. The number of policies amounted to 8,427,216 non-life insurance contracts and 1,493,621 life insurance contracts.

Assets of the insurance companies in the Republic of Croatia at the end of 2017 amounted to EUR 5,472 million and accounted for 7% of total assets of all financial institutions. Still, the Croatian financial system is dominated by commercial banks (67%) and mandatory pension funds (16%).

11 Data refer to 2016.

In 2017, there were 19 direct insurance companies registered in Croatia. Among those, there are 5 life insurance undertakings, 6 non-life insurance undertakings, and 8 insurance undertakings which simultaneously pursue both life and non-life insurance activities. Five Croatian insurance undertakings pursue business in other Member States under the freedom to provide services. There are also two composite branches operating in Croatia on a freedom of establishment basis.

Although mutual insurers in the legal form are allowed by Croatian insurance law, there were none present in the market in 2015 (AMICE, 2018). All 5 mutual/cooperative insurers in 2015 were subsidiaries of foreign mutual/cooperative insurers.

The gross written premium concentration in the five largest insurance companies was 61.6% in 2016.

Insurance companies invest a great portion of their assets into bonds issued by the Republic of Croatia. Insurers also invest in municipal and corporate bonds, shares and other securities, deposits with banks, real estate, and loans.

The largest share of the premium income is attributed to life assurance activities (24.51%), followed by the motor vehicle liability (22.63%), casualty insurance for road vehicles (9.8%), fire and elementary

25 damage insurance (6.8%), and property insurance (6.5%). Health insurance only accounts for 5% of total premium income.

- Non-life Insurance:

Non-life insurance gross written premiums at the end of 2017 amounted to EUR 820 million. Insurance penetration was 1.69% of GDP and insurance density amounted to $203.76 per capita in 2016.

The main lines of business of non-life insurers are motor vehicle insurance (48.7%), property insurance (19.9%), and personal accident and healthcare (16.5%).

The Croatian non-life market is unusual in east European terms in that domestic insurers still occupy commanding positions in the three largest insurance classes. The leading insurers are Croatia Insurance and the Agram Group (comprising Euroherc and Jadransko). In 2016 Croatia Insurance wrote 44.3% of the property market, whilst Croatia Insurance and the Agram Group wrote 60.3% of the MTPL market. Croatia Insurance benefits from its legacy as the ex-state insurance company, whereas the Agram Group has grown through acquisition and entrepreneurship.

In 2016, companies with over 50% foreign ownership wrote only 36.3% of non-life premiums. This relatively low level of foreign penetration is explained by the strength of the two local brands Croatia Insurance and the Agram Group.

Following the privatization of Croatia Insurance, the only remaining state insurer is Croatia Credit Insurance (Hrvatsko Kreditno Osiguranje), which is a wholly owned subsidiary of the state-owned Croatian Bank for Reconstruction and Development. HKO is the main provider of short-term export credit insurance.

The market share of the top-5 non-life insurance companies was 69.22% in 2016. The leading non-life insurance companies in 2016 ranked by premium income are:

The following table shows some of the largest groups and their member companies:

Group Member companies

Life insurers Non-life insurers Significant other group companies Croatia Lloyd (reinsurer in run-off), PBZ Croatia Mandatory Pension Co, Croatia Croatia Insurance Group Croatia Insurance* Croatia Insurance* Insurance Voluntary Pension Co Euroherc Insurance, Agram Group Agram Life Insurance Sunce Polyclinics, Euroleasing Jadransko Insurance Allianz Zagreb Group Allianz Zagreb* Allianz Zagreb* Allianz ZB Mandatory Pension Co, Allianz ZB Voluntary Pension Co Wiener Insurance VIG*, Erste Vienna Insurance Group Wiener Insurance VIG* n/a VIG - Life Insurance:

In 2017 life insurance gross written premiums amounted to EUR 394 million, which represented 32.5% of the Croatian insurance market. Density of life insurance in 2016 amounted to $101.77 per capita and insurance penetration was 0.85% of GDP.

The most popular life insurance products were endowments (60.2%), followed by unit-linked business (16.6%).

Most of life insurers’ investments are in securities (82%), which are mainly Croatian government bonds. AXCO reports the following table showing the invested assets (HRK mn) by life insurance companies:

With the exceptions of Croatia Insurance and Agram Life the market is entirely foreign-owned, with foreign insurers accounting for 73.2% of premiums in 2016.

Market shares are relatively diffuse, with no one insurer accounting for more than 20% of premiums. The top-5 life companies had an aggregate market share of 64% in 2016. The leading life insurance companies in 2016 ranked by premium income are:

The main market participants in the life sector are reported in the following table:

Market developments:

- Slovenian insurer Sava Insurance Company, which is represented in Croatia through a branch, has agreed to buy the Croatian life and non-life subsidiaries of Ergo. - Societe Generale Insurance has changed its name to OTP Insurance following its takeover by OTP Bank Croatia. - Croatia Insurance has opened a branch in Slovenia. - Croatia Insurance has acquired 100% of BNP Paribas Cardif. - Maribor Insurance in Slovenia has acquired Velebit life and non-life companies in Croatia and transformed them into branches. The merged businesses have adopted the same name Sava Insurance Company. - Two Slovenian insurers (Adriatic Slovenica and Sava Insurance) have taken advantage of Croatia’s EU membership to transform their Croatian subsidiaries into branches. - Two European bancassurance have exited the market: BNP Paribas by selling BNP Paribas Cardif to Croatia Insurance and Societe Generale by selling its life insurer to OTP Bank Croatia. - VIG merged its two Croatian subsidiaries Erste Insurance VIG and Wiener Insurance VIG with effect from 30 April 2018. - In November 2016 Willis Towers Watson was licensed in Croatia. - In September 2017 torrential downpours in Zadar and Knin caused estimated economic losses of $150.56mn, of which only $6.02mn were insured. Damage included the washing away of bridges and flooding of underground carparks. Insurers’ results may be set back in 2017 by the unprecedented run of natural disasters, but these could be positive in the long run by encouraging more households and farmers to buy insurance. The government has admitted that it has a natural catastrophe compensation budget of only $3.01mn and that those who were uninsured will have to recover by their own efforts. Government ministers have therefore started promoting the benefits of insurance to farmers, businesses and households. - There are two main threats to market stability. One is the insolvency of the Agrokor food production and supermarkets group, which is Croatia’s largest company accounting for an estimated 15% of the country’s GDP. A number of domestic insurers have quite large exposures to the collapsed group in terms of loans, investments, premium debts and credit insurance limits which could be financially destabilizing. Agrokor is said to have paid premiums of around EUR 10mn a year, a lot of which will not be renewed. There is also the risk that many other Croatian enterprises will be dragged down by the Agrokor collapse, either because of unpaid debts, or because they were commercially dependent on sales to Agrokor which may find it difficult to replace with sales to other retailers. - The Adris Group, owner of Croatia Insurance, has made two abortive attempts to become a force in regional financial services by taking over the Slovenian Sava Re Group, both of which were blocked by the Slovenian supervisor.

II. Supervisor

The Croatian Financial Services Supervisory Agency (HANFA) is an independent supervisory body whose scope of activities and competence cover the supervision of financial markets, financial services and supervised entities providing those services. HANFA directly answers to the Croatian parliament.

HANFA was established in 2005 integrating three existing supervisory institutions, namely the Croatian Securities Commission, the Agency for Supervision of Pension Funds and Insurance, and the Insurance Companies Supervisory Authority.

HANFA exercises supervision of the insurance market for the purpose of ensuring an efficient, fair and stable market and with a view to protecting the interests of beneficiaries and to strengthening the overall stability of the financial system. HANFA also supervises the activities of the Croatian Insurance Bureau.

The insurance business in Croatia is mainly regulated by the Insurance Act (IA) -Official Gazette No. 30/15.

On the basis of supervision, verification and assessment, HANFA determines whether insurance companies operate in accordance with the regulation, whether they have in place an appropriate organizational structure and a stable management system, as well as capital that provides coverage of risks that insurance companies are exposed to or could be exposed to in their business operations.

In defining the frequency and intensity of supervision, HANFA is guided by the size and significance of insurance companies, as well as the scope, nature and complexity of risks present in the insurance companies’ business.

The Agency shall have a board consisting of 5 members, one of whom is the president. All members shall be appointed and discharged by the Croatian Parliament, on the recommendation of the government. The board is advised by a nine-member council, three of whom are appointed by the government, five by associations representing supervised entities.

HANFA is entirely financed by fees levied on supervised entities. The current fee for life, non-life and reinsurance companies is 0.07% of gross written premiums.

HANFA has around 150 staff, a number which has not been increased despite the heavier workload resulting from EU membership and the implementation of Solvency II.

III. Cross-border Supervision

HANFA supervises the business operations of the following entities:

- Insurance companies with their registered offices in the Republic of Croatia and their branches in the Republic of Croatia and outside it. - National insurance bureau. - Third-country insurance companies, which conduct insurance business in the Republic of Croatia through a branch. - Insurance companies from other Member States that pursue the insurance business under the right of establishment or the freedom to provide services in the territory of the Republic of Croatia.

Supervision is based on a prospective (forward-looking) and risk-based approach, and it constitutes verification on a continuous basis of whether supervised entities operate in accordance with the Insurance Act and other regulations.

During supervision HANFA reviews and assesses:

- The system of governance

- Technical provisions - Solvency capital requirement and minimum capital requirement - Investment rules - Quality and quantity of own funds - Ongoing compliance of the internal model with the requirements of the Insurance Act and regulations on risk management - Ability of the insurance company to withstand possible events or future changes in economic conditions - Other information necessary for the supervision

Supervision of insurance business carried on in a Member State:

According to article 79 of the Insurance Act, the supervisory authorities shall supervise a branch of an insurance undertaking in a Member State or carrying on of direct insurance business in a Member State. The supervisory authorities may request from the competent supervisory authorities of the Member State to inspect the operations of the branch of that insurance undertaking.

Article 80 specifies that an insurance undertaking which carries on insurance activities in a Member State shall report to the supervisory authorities on the insurance activities it carries on in a specific Member State separately for the insurance activities carries on through a branch and for the direct insurance activities.

Regarding insurance activity in non-Member States, article 81 stipulates that an insurance undertaking is permitted to conduct insurance operations in a third country only through a branch, provided it complies with the legislation of the country in question.

Supervision of insurance business carried out by an insurance undertaking from a Member State:

Supervision of an insurance undertaking from a Member State which carries on insurance business in the territory of the Republic of Croatia shall be exercised by the competent supervisory authorities of the Member State in question. On request of the supervisory authorities of the Member State, the supervisory authorities shall conduct supervision of the operations of the branch of the insurance undertaking from the Member State in the territory of the Republic of Croatia.

Article 156 stipulates that the provisions relating to the supervision of insurance undertakings shall apply to supervision of branches of third-country undertakings.

Cooperation with supervisory authorities (article 134)

The supervisory authorities may pass on information to:

- Competent supervisory authorities of the Member States if they require such information for the purpose of supervision of operations of insurance undertakings and if such authorities are subject to the obligation of professional secrecy. - Competent supervisory authorities of the Member States and foreign countries under cooperation agreements concluded with them where they require such information for the purpose of performing their supervision of insurance activities, subject to reciprocity.

IV. International Cooperation

HANFA is a signatory to the Memoranda of Understanding with the insurance market supervisory authorities of the following countries: Austria, Montenegro, Kosovo, Hungary, Macedonia, Germany, and Slovenia.12

Although HANFA is a member of the IAIS, it does not appear in the list of MMoU signatories of the IAIS.

An intergovernmental agreement between the Croatian government and the US government entered into force on 27 December 2016; the agreement aims to facilitate compliance with the US Foreign Account Tax Compliance Act 2010 (FATCA) by financial institutions in Croatia in a manner that reduces their overall reporting burden.

V. Croatian Insurance Bureau (HUO)

The Croatian Insurance Bureau was established in 1992 as a non-profit organization funded by insurance companies members of the Bureau. Membership in the Bureau is mandatory for insurance companies engaged in activities relating to compulsory insurance within the transport sector, while other insurance companies may join the Bureau voluntarily. Financial operations of the Bureau include regular operations and the Guarantee Fund.

The bureau has 4 non-motor voluntary members (Agram Life, Erste VIG, OTP, and Merkur) in addition to its 14 mandatory members.

The bodies of the Croatian Insurance Bureau are the assembly, board of management, and managing director (article 271). The members of the assembly shall be appointed by insurance undertakings which are members of the Bureau.

The activity of the Bureau is financed by its members.

All Croatian enterprises are required to join the Croatian Chamber of Economy, which has a section for each industrial sector, including one for insurance. This constitutes a kind of rival association to the HUO although it carries out none of the technical functions of the HUO.

VI. Insurance Guarantee Scheme

The Guarantee Fund is operated by the HUO and was established in 1997.

The Guarantee Fund covers:

- Claims arising from accidents caused by Croatian registered vehicles abroad and guaranteed by the Croatian Insurance Bureau - Claims arising from accidents caused in the territory of the Republic of Croatia by uninsured and untraced motor vehicles, motor boats and aircrafts - Claims arising from accidents in an uninsured public transport vehicle

The Guarantee Fund intervenes also in the event of winding-up of an insurance company transacting compulsory traffic insurance lines. In order to protect the MTPL market in case of insolvency of a MTPL insurer, the Croatian Insurance Bureau proposed an amendment to the Compulsory Traffic Insurance Law

12 https://www.hanfa.hr/about-us/international-relations/

33 to limit the annual payments of the Guarantee Fund in case of insolvency to 0.5% of the MTPL market premium.

Members of the HUO are required to deposit an irrevocable bank guarantee related to the size of their compulsory insurance accounts. The minimum amount of the bank guarantee is HRK 4mn and the maximum HRK 20mn. If the bank guarantee is not sufficient to meet the liabilities of an insolvent company under its compulsory policies, the shortfall is made up by a levy on the other bureau members.13

The Bureau is obliged to separate assets of the Guarantee Fund from other assets of the Bureau and keep them in a special account. In 2016, total assets of the Guarantee Fund amounted HRK 16m.

There is no industry fund for compensating the policyholders of insolvent life companies. In case of bankruptcy, life policyholders have priority claim over assets held in the mathematical reserve. Poland I. Characteristics of the Insurance Market

In 2017, there were 61 licensed insurance undertakings performing insurance activity in the Republic of Poland, of which 27 were life insurance undertakings (including 2 mutual insurance companies) and 34 were non-life insurance undertakings (including 9 mutuals). The increase in corporate business written by mutual companies has caused some downward pressure on insurance rates.

13 The only insolvencies which have occurred in Croatia involved Alpina, which was put into liquidation in 2002, and specialist health insurer Addenda, which had its license revoked in 2006 on grounds of capital deficiency. Both companies were small and neither insolvency involved any losses to policyholders.

Total gross written premiums in 2017 amounted to PLN 62.35 billion. In Poland, investments of insurance companies amounted to 8.7% of GDP in 2016.

Insurance companies mainly invest in shares and other variable-yield securities and unit trusts (44.1%), debt securities and other fixed-income securities (39.3%), and subordinated units (11.9%).

At the end of 2016, assets of insurance companies represented 7.9% of total assets of all financial institutions comprising the Polish financial sector. On the other hand, asset of commercial banks and investment funds accounted for 73% and 11.9%, respectively.

- Non-life Insurance

Gross written premiums in the non-life sector amounted to PLN 37.8 billion in 2017. Insurance penetration was 1.7% of GDP and insurance density was EUR 231 per capita. The share of non-life insurance in the total insurance business was 60.6%.

The structure of the non-life segment was dominated by motor insurance, accounting for 62.7% of all non- life income. Property insurance (17.4%) and personal accident and healthcare (8.8%) ranked second and third, respectively.

Of the total non-life insurers, two-thirds are majority foreign-owned. There are at least 17 companies with majority foreign capital involvement. There are also 28 branches in Poland of foreign insurance companies operating in EU Member States. Germany is the largest foreign investor in both life and non-life sectors, with major non-life players being Allianz, Ergo Hestia and HDI, along with Vienna Insurance Group and UNIQA. Moreover, there are 789 companies registered to offer insurance in Poland under EU freedom of services arrangements.

There are still two effectively state-run companies, being PZU, in which the treasury owns just over one- third of the company, but which is regarded as state-controlled, and KUKE, the export credit insurer.

The top-5 non-life insurers accounted for 71.10% of the market, which continues to be led by PZU, the previously state-owned non-life insurer, with a 33.12% market share. The leading non-life insurance companies in 2017 ranked by premium income are:

The leading insurers have associated life insurance companies.

The following table shows the largest groups and their member companies:

Group Member companies

Life insurers Non-life insurers Significant other group companies

PZU Group PZU Zycie PZU SA, PZU TWU, Link 4 PZU Zdrowie, Bank Pekao SA, Alior Bank SA

ERGO Hestia, DAS TU Ochrony Prawnej, Moje Towarzystwo ERGO Group STUnZ Ergo Hestia n/a Ubezpiecze, Europaische Reiseversicherung Allianz Group Allianz Zycie Allianz Polska, Euler Hermes n/a

InterRisk, PZM TU Vienna Insurance, Compensa TUnZ, Polisa-Zycie (these Vienna Insurance Group Benefia, Compensa, Gothaer n/a two now merged) and Vienna Life Towarzystwo Ubezpieczen

TUnZ Warta, TUnZ EUROPA Zycie, WARTA SA, HDI Asekuracja, TU Talanx Group n/a Open Life TU Zycie Europa

Generali Group Generali Zycie, Concordia Capital SA Generali TU SA, Concordia Polska n/a - Life Insurance

Gross written premiums in the life sector amounted to PLN 24.6 billion in 2017. Life insurance penetration was 1.3% of GDP and insurance density was EUR 150 per capita.

The structure of the life segment was dominated by unit-linked life insurance products (41.5%) and personal accident and healthcare (22.5%), which together accounted for 64% of life gross written premiums in 2017.

AXCO reports the following table showing the invested assets (PLN mn) by life insurance companies:

Of the life insurance companies seven were listed as majority domestically-owned and the remainder majority foreign-owned (of which 12 were 100% foreign owned). Most of the market is made up of joint stock insurers and the majority have foreign capital involvement from financial, banking and insurance groups.

There are two state life insurance companies, one part-owned (PZU Zycie) and one wholly-owned (Pocztowe Towarzystwo na Zycie SA). The latter is owned by the state postal service.

The top-5 life companies had an aggregate market share of 63.53% in 2017. The largest insurer remained PZU Zycie, still substantially state-owned, which had a life market share of 34.86%. The leading life insurance companies in 2017 ranked by premium income are:

Market developments:

- In May 2018, the merger of the two Vienna Insurance Group subsidiaries (Compensa TunZ and Polisa Zycie TU) was completed. - Warta SA, Europa SA, and Open Life SA are owned by the Talanx group. - Compensa, Polisa, and Vienna Life are owned by the Vienna Insurance Group.

- Mr. Jacek Jastrzebski was appointed chairman of the KNF in November 2018 following the resignation of his predecessor who was accused of soliciting a $ 3.71bn bribe from Getin, a struggling bank, in return for looser oversight. - In 2018, the Italian Generali group acquired the non-life insurance group Concordia Polska and its life insurer Concordia Capital SA from the German Concordia insurance group. Concordia is a leading insurer of agricultural insurance products. - In June 2018 it was announced that the Vienna Insurance Group was to acquire Gothaer Towarzystwo Ubezpieczen, which is the Polish non-life subsidiary of the German Gothaer Insurance group. - According to a press release issued by the IMF in January 2017, it is expected that the National Bank of Poland and KNF will merge at some point, although there does not appear to be a timescale set for this. A draft law concerning the merger has been prepared but no political decision has yet been made on whether this would proceed.

II. Supervisor

The Polish Financial Supervisory Authority (KNF), established in 2006, is a public administration body that exercises supervision of the financial market, including banking, capital market, insurance market, pension market, financial conglomerates, electronic money institutions, payment institutions and payment service bureaus, cooperative savings and credit unions. The KNF took over the duties of the Insurance and Pension Funds Supervision Commission, the Polish Securities and Exchange Commission, and the Commission for Banking Supervision.

The aim of the KNF is to ensure the proper functioning of the financial market, its stability, security and transparency, and to ensure that the interests of the market’s participants are protected.

The insurance business in Poland is mainly regulated by the Act of 22 May 2003 on insurance activity.

The President of the Council of Ministers exercises supervision of operations of the KNF. The KNF is integrated by 8 members: the chairman, 2 vice-chairpersons, and the representatives of the minister of finance, the ministry of economic development, the minister of labor and social policy, the president of the national bank of Poland, and the president of the Republic of Poland. The chairman of the KNF is appointed by the president of the Polish Council of Ministers.

The expenses representing costs of the operations of the KNF, including remuneration and bonus awards payable to KNF employees, are financed from the fees paid by the regulated entities. According to AXCO, contribution rates for insurers were set at 0.0571% of their gross premiums paid to finance the KNF. Insurers established in the EEA and operating by way of freedom of services are not required to make payments to the KNF.

III. Cross-border Activity

In accordance with the home country principle, the KNF supervises all financial institutions which are established in Poland. It oversees their activities on the territory of the EU.

According to AXCO, branches of foreign insurers are required to report to the KNF on a quarterly basis.

IV. International Cooperation

The KNF cooperates with competent foreign supervisory authorities and provides them with all information necessary for the performance of tasks related to supplementary supervision, acting in compliance with the sectoral regulations concerning professional secrecy obligations. Moreover, the KNF signed the MMoU of the IAIS in 2012.

V. Polish Insurance Association (PIU)

The Polish Insurance Association (PIU) is a local trade organization established in 1990, which operates with a view to solving problems on the insurance market in Poland and represents all insurance companies operating in Poland. Membership in the PIU is compulsory and takes effect on the day of commencement of the insurance activity within the territory of Poland by the domestic insurer or foreign insurer.

The association is funded by contributions from its membership which were set to 0.024% of gross written premiums.

VI. Insurance Guarantee Scheme

In Poland, the Insurance Guarantee Fund (UFG) protects insured persons from the insolvency of the insurance company. However, only persons who are linked with the bankrupt or liquidated insurer by a legal relationship arising from the agreement of compulsory insurance and life insurance contracts can claim against the Fund. The other insured by insolvent insurance companies cannot rely on the compensation of the Fund.

The Fund performs other functions not related to insolvency cases. The main duty of the Fund is the payment of compensations to the road accidents victims, which were caused by vehicle keepers who have not fulfilled the statutory obligation to insure the vehicle with mandatory civil liability and farmers who have also failed to do so. The scope of the Fund obligation also includes payments of compensation to the people injured in road collisions in a situation in which the perpetrator of this type of injury could not be determined.

Claims to the Fund are compensated at 100%, except for life insurance policies and other liability claims which are covered at 50% up to a maximum of EUR 30,000. According to Oxera (2007), the maximum amount covered by the Fund is:

- Motorcar and farmers’ TPL: up to EUR 1.5m for personal injuries and EUR 300,000 for material damages. - Farm buildings: unlimited. - Professional TPL: up to EUR 30,000. - Life insurance: up to EUR 30,000.

A member of the Fund is an insurance company authorized to carry out activities in the field of compulsory insurance or life insurance. The member of the Fund is also a foreign insurance company operating in the Republic of Poland. The Fund operates under the host country principle, meaning that it only covers policies issued by insurance undertakings in Poland (branches of Polish firms in other EU countries are not covered).

The Fund is financed by a levy on non-life insurers based on premium income for the relevant classes. The levy for MTPL and farmers’ liability insurers is set to 0.7% of their gross written premiums. For life insurance the Fund has the assets of an insolvent life insurance company transferred to it, there is no levy on life insurance premiums but if the insurance fund is insufficient to pay the claims a levy can be imposed on the remaining market.

The Fund is under the control of a Council comprising 9 members: one from the Ministry of Finance, one from the KNF, and seven from insurers. Italy I. Characteristics of the Insurance Market

Insurance companies operating in Italy numbered 215 at the end of 2016. They counted 109 companies with registered offices in Italy and 107 branches of foreign insurance companies, the bulk of which are based in other EU countries (103). In addition, 1,000 insurance companies with registered offices in other EU countries were operating in Italy under the freedom to provide services. The 109 insurers with registered offices in Italy comprised, by legal form, 105 limited share companies, 3 mutual companies and 1 cooperative society.

In 2016, 61 insurance companies engaged exclusively in life business (41 domestic companies and 20 foreign branches with head office in the EU) and 120 exclusively in non-life business. A total of 27 (including 15 foreign branches) did business in both the life and non-life sectors.

Gross written premiums totaled EUR 138,082 million. Insurance penetration was 8% of GDP and insurance density was EUR 2,422 per capita.

Investments of insurance companies were mainly directed to government securities (42.5%), of which over 90% were issued by Italy, and bonds (20.1%).

- Non-life Insurance

Gross written premiums from non-life policies totaled EUR 33,909 million in 2016. Insurance penetration was 1.9% of GDP and insurance density was EUR 528 per capita. Penetration is smaller when motor liability insurance (compulsory in most countries) is excluded, declining to 0.9%.

The structure of the non-life insurance segment was dominated by motor vehicle insurance (50.6%), accident and health (18.8%), and general liability (9.1%).

The non-life insurer Poste Assicura is majority-owned by the state-owned post office (Poste Italiane), but its involvement in the non-life sector is still relatively modest.

Foreign company involvement in the market is strong and over 35% of premium income is estimated to be derived from companies located elsewhere in the EU.

The market is dominated by the Unipol, Generali, and Allianz groups, representing just over 50% of total market size. The top-5 non-life insurance companies accounted for 58.98% of the market. The leading non-life insurance companies in 2016 ranked by premium income are:

The following table shows the largest groups and their Italian member companies:

- Life Insurance

Gross written premiums amounted to EUR 104,173 million. The life premiums’ share of total premium income was 75.4%. Insurance penetration was 6.1% of GDP and insurance density was EUR 1,894.

In 2016, traditional products represented around 72% of individual life written premium, followed by individual linked products (23.5%). The largest proportion of premium comes from traditional policies vis- à-vis investment contracts.

Investments of life insurance companies were mainly directed toward bonds (62.7%). There is some investment in corporate bonds, but this is limited due to local supply of large company bonds. The following table shows the invested assets (EUR mn) by life companies in different investments:

Premium written on a freedom of services basis is important to the market; much of the premium is unit- linked business.

Nearly all the major business groups in Italy are involved in all aspects of financial services, with many of the insurance groups controlled by banks.

The leading life insurance brand, Poste Vita, is owned by the state-owned post office, Poste Italiane.

Just under half of the market is dominated by the top five companies. In particular, the top-5 companies accounted for 47.10% of the life market in 2016. The leading life insurance company is Poste Vita, owned by the Italian Post Office.14 A feature of the market is that a number of the groups operate through several brands, thus the structure of the market is fragmented. The leading life insurance companies in 2016 ranked by premium income are:

14 But this does not account for premium written by groups of companies such as Intesa Sanpaolo and Generali, with these groups each having a greater premium volume.

The following table shows the largest groups and their member companies:

Group Member companies

Life insurers Non-life insurers Significant other group companies Banca Generali Financial Planners, Banca Generali Private Generali Generali Italia*, Alleanza Assicurazioni, Genertel Life Generali Italia*, DAS, Europ Assistance, Genertel Banking Intesa Sanpaolo group Fideuram Vita, Intesa Sanpaolo Vita Intesa Sanpaolo Assicura

Mediolanum group Mediolanum Vita, Mediolanum International Life Mediolanum Assicurazioni

UnipolSai Assicurazioni*, Arca, Linear, DIALOGO, Europa Tutela UnipolSai Assicurazioni*, Arca Vita, Bim Vita, Liguria Vita, Linear Unipol group Giudizaria, Incontra, The Lawrence Re (Ireland), ISI, Liguria, Unipol Banca Life, Popolare Vita, The Lawrence Life (Ireland) Pronto Assistance, SIAT, Systema, UniSalute

Allianz*, Antoniana Veneta Danni, CreditRas Assicurazioni, Allianz group Allianz*, Antoniana Veneta, CreditRas Vita, Allianz Global Life Allianz Bank Financial Advisors Genialloyd AXA Assicurazioni*, AXA Interlife, AXA MPS Assicurazioni Vita, AXA Assicurazioni*, AXA MPS Assicuarazioni Danni, AXA ART AXA group AXA Investment Managers AXA MPS Financial Ltd, AXA Life Europe Versicherung, AXA Assistance

Cattolica Previdenza, BCC Vita, Berica Vita, Lombarda Vita, ABC Assicura, BCC, Duomo Uni One, FATA, Societa Cattolica*, Cattolica Societa Cattolica* TUA

Reale Mutua Italiana Assicurazioni*, Societa Reale Mutua* Italiana Assicurazioni*, Societa Reale Mutua*

Aviva Italia*, Avipop Vita, Aviva Vita, Aviva Assicurazioni Vita, Aviva group Aviva Italia*, Avipop Assicurazioni Aviva Life, Aviva Previdenza Market developments:

- In November 2017, it was notified that Banco BPM had reached an agreement for sale of its 65% stake in Avipop Assicurazioni and Popolare Vita to Societa Cattolica di Assicurazioni. - The global Italian insurer, the Generali group, is reviewing its operations in a number of countries as it aims to focus on strong and profitable markets. - In April 2017 IVASS authorized the acquisition by Reale Mutua of the majority shareholding in Uniqa. Its subsidiaries, Uniqa Previdenza and Uniqa Life, are now part of the Reale Group. - Concentration restricts competition and limits innovation. Local sources suggest that the Italian Competition Authority (AGCM) may be reluctant to allow any further significant M&A transactions, although the recent implementation of Solvency II may prove problematic for some of the smaller insurers. - Unipol is also present in Serbia through the control of the third largest local insurer (DDOR Novi Sad). - Bene Assicurazioni’s investors include Aspen Group and Nuernberger Versicherung. - Liberty Mutual Insurance Group announced its intention to acquire Elba Assicurazioni. - Reale Mutua has agreed to acquire the Italian life and non-life operations of the Austrian insurer Uniqa.

II. Supervisor

The Institute for the Supervision of Insurance (IVASS), established in 2012, is a body endowed with legal personality whose goal is to ensure adequate protection of insured persons with a view to the sound and prudent management of insurance and reinsurance undertakings and their transparency and fairness towards customers. IVASS pursues the stability of the financial system and markets. Although the law explicitly provides that IVASS shall operate in an independent and autonomous manner, given the composition of its governing bodies the activity and policymaking of IVASS is heavily influenced by the Bank of Italy’s approach toward supervision and prudential matters.

The Institute authorizes undertakings to pursue insurance and reinsurance business and carries out inspections at insurance and reinsurance groups and undertakings. IVASS carries out supervisory functions over undertakings that exercise on the Italian territory insurance or reinsurance activity in any class and in any form.

IVASS is funded through fees to be paid by the supervised entities, the amount of which is established every year by the decree of the Minister of Economy and Finance after hearing IVASS, so as to ensure the financial cover of the costs of charges for its operation. The levy to be charged to insurers for the 2017 financial year will be 0.34‰ of 2016 earned premium income.

The bodies of IVASS are: the President, the Board of Directors, and the Joint Directorate. The President of IVASS shall be the Director General of the Bank of Italy. The Board of Directors shall consist of the President and two members.15 The Joint Directorate shall consist of the Governor of the Bank of Italy, the Director General of the Bank of Italy, the three Deputy Directors General of the Bank of Italy, and two members of the IVASS Board of Directors.

The insurance sector in Italy is regulated by the Code of Private Insurance- Legislative Decree n. 209 of 09/07/2005.

III. Cross-border Activity

Article 26 of the Code of Private Insurance establishes the obligation by IVASS to publish the list of undertakings licensed to pursue life and non-life insurance in the territory of the Italian Republic by way of establishment or of free provision of services.

Supervision of Italian insurance undertakings

Insurance undertakings with head office in Italy shall be subject to the supervision of IVASS for both the business carried out in the territory of the Italian Republic and that carried out in the territory of the other Member States under the right of establishment or the freedom of services (article 192). IVASS shall exercise the functions of prudential supervision through the constant monitoring of undertaking’s technical financial and assets/liability management, with special regard to the adequacy of capital requirements and technical provisions, the availability of assets and eligible own funds for the full representation of technical provisions and Solvency Capital Requirements, and the assessment of emerging risks.

15 The members of the Board of Directors shall be chosen among persons of unquestioned integrity, independence and high professional expertise in insurance matters.

Supervision of undertakings from other Member States

Insurance undertakings with head office in other member States shall be subject to prudential supervision by the supervisor of the home member State also as regards the business carried out, under the right of establishment or the freedom of services, in the territory of the Italian Republic (article 193). If IVASS has reason to consider that the activities of the insurance undertaking might affect its financial soundness, it shall inform the competent authorities of the undertaking’s home Member State. If the undertaking does not comply with the laws and implementing provisions IVASS shall inform the supervisory authority of the home Member State and request that the measures necessary to end violations be taken.

Supervision of undertakings with head office in a third State

Undertakings with head office in a third State can only operate in the Italian Republic through the establishment of a branch. Authorization may not be granted when the home State does not respect the principle of equality of treatment or of reciprocity.

Branches of insurance undertakings with head office in third States shall be subject to the supervision of IVASS for the business carried out in the territory of the Italian Republic (article 194).

IV. International Cooperation

IVASS forms part of the IAIS and signed the MMoU in 2012.

Article 10 of the Code of Private Insurance specifies that IVASS shall collaborate, also by exchanging information, with EIOPA and the other European supervisory authorities, the Joint Committee, the ESRB, the institutions of European Union and the supervisory authorities of the individual Member States, in order to facilitate the exercise of their respective functions. Within the cooperation agreements and subject to reciprocity and equivalent obligation of confidentiality IVASS may exchange information with the competent non-EU authorities.

V. Associazione Nazionale fra le Imprese Assicuratrici (ANIA)

Founded in 1944, ANIA is a voluntary non-profit organization that represents insurance companies operating in Italy. Its main purpose is to develop and spread safety and prevention culture in Italy. In 2016, ANIA counted 146 member companies. Its membership base comprises most Italian insurers, accounting for 85% of market premium.

VI. Insurance Guarantee Scheme

In Italy there is no policyholder protection fund for life or non-life insurance. However, there is a special scheme for motor insurance and a special scheme for hunters’ liability insurance.

The national guarantee fund for road accident victims shall pay compensation for damages caused by motor vehicles and craft for which insurance is compulsory, when:

- The accident has been caused by an unidentified vehicle or craft - The vehicle or craft is not insured - The vehicle or craft is insured with an undertaking pursuing business in the territory of the Italian Republic by way of establishment or of free provision of services, which has been placed under compulsory winding up at the time of the accident or afterwards

- The vehicle has been used against the will of the owner, usufructuary, buyer under reservation of title or lease of an operating or financial leasing

In these cases, compensation shall be due for personal injury and for material damages. The Fund shall also be required to pay compensation for accidents caused within the territory of another Member State by vehicles registered there and insured with an undertaking having it head office in Italy and pursuing business in that State by way of establishment or of free provision of services which is placed under compulsory liquidation at the time of the accident or afterwards. The compensation paid by the Fund shall be paid up to the insured minimum amounts of:

- In case of personal injury, EUR 5,000,000 per claim, regardless of the number of victims - In case of material damage, EUR 1,000,000 per claim

Every 5 years from the date 11 June 2012 these amounts shall be automatically indexed to the percentage shown by the European index of consumer prices.

The Fund is managed by CONSAP (Concessionaria Servizi Assicurativi Pubblici S.P.S) under the supervision of the Ministry of Economic Development.16 The Minister of Economic Development establishes the conditions and arrangements for the administration, intervention, and reporting of the Fund.

Undertakings authorized to pursue insurance against civil liability in respect of the use of motor vehicles and craft are required to pay CONSAP (autonomous management of the Fund) an annual contribution proportional to the premium earned for each contract concluded in compliance with the insurance obligation. The amount of the contribution cannot exceed 4% of the taxable premium. According to AXCO, contributions were set to 2.50% in 2016. The State is not involved in the funding of the scheme.

CONSAP, in its capacity as administrator of the Fund, shall act as Italian compensation body. The Italian compensation body shall be responsible for providing compensation to persons resident in the territory of the Italian Republic in respect of any loss or injury resulting from accidents occurring in another member State and caused by the use of:

- A vehicle insured through an establishment in another member State and based in another member State - A vehicle which is impossible to identify

There exists another national guarantee fund for hunting victims, which pays compensation for damages caused by the practice of hunting for which insurance is compulsory. This Fund covers accidents when the hunter is unidentified, the hunter liable for damage is not covered by compulsory insurance against civil liability, or the hunter is insured with an undertaking which has been placed under compulsory liquidation.

Undertakings authorized to pursue hunting liability insurance shall be required to pay CONSAP an annual contribution proportional to the premium earned for each contract. The amount of the contribution can be set up to a maximum of 15% of the taxable premium. In 2017 the contribution to the hunting accident victims’ fund was increased to 10%.

16 CONSAP, established in 1993, is owned by the Ministry of Economy and Finance. CONSAP is set up as a public limited company.

If the hunter is unidentified, compensation only covers for personal injury resulting in death or permanent disability higher than 20%. In the rest of cases, compensation shall be due for personal injury and for material damage.

Both funds cover insurance policies issued in Italy by any insurance undertaking, including EU branches. As such, it operated on the basis of the host state principle. Spain I. Characteristics of the Insurance Market

The Spanish insurance market registered premium volume of EUR 64.5 billion in 2017. Insurance penetration was 5.5% and insurance density was EUR 1,358 per inhabitant.

Insurers’ investment portfolios are dominated by fixed income securities (74%), cash and deposits (5.1%), and mutual funds (5.1%). In the category of fixed income assets, sovereign fixed income is predominant (52.9% of the investment portfolio), while corporate fixed income represented 21.2% of the portfolio. These percentages vary across the life and non-life insurance sectors. In particular, in portfolios linked to life insurance obligations, fixed income accounted for 80% of investment, while in non-life portfolios it represented around 39%. Investments in property and equities represented 2.07% and 2.05% of the life insurance portfolio respectively, far below the equivalent percentages in non-life portfolios (14.39% and 15.17% respectively).

The five largest insurance groups in the life insurance segment accounted for 56.2% of this market. The five leading groups for non-life insurance business had a market share of 46.9% in 2017.

In 2017, there were 224 insurance undertakings with head office in Spain.

In 2017, 16 insurance undertakings with head office in Spain had a branch in other EU Member States (the total number of branches was 54) and 55 operated under the freedom to provide services.

In 2017, there were 2 branches from insurers with head office in a third State operating in Spain, 72 branches from insurers with head office in other Member States, and 785 insurance undertakings from other Member States operating under the freedom to provide services.

Ownership of insurance undertakings with head office in Spain:

Foreign Capital Participation in Spanish Insurance Undertakings, 2017 Total Foreign Participation 12.81 European Union Total 8.69 Germany 0.92 France 2.94 Netherlands 2.29 Ireland 0.04 Italy 0.96 Luxembourg 0.22 United Kingdom 1.33 Third States Total 4.12 United States 3.51 Switzerland 0.61

Spanish Insurance Undertakings with Foreign Capital Participation, Gross Written Premiums, 2017 Foreign Capital Participation Total GWP Life GWP Non-life GWP >50% of total capital 8,750 2,391 6,359 25%-50% of total capital 500 97 403 <25% of total capital 1,437 475 962 * Data are in EUR million. Home country of insurance undertakings with head office in other states operating in Spain under the right of establishment:

Foreign Insurance Undertakings Operating in Spain through a Branch, 2017 European Union Germany 7 Belgium 3 France 16 Ireland 7 Liechtenstein 1 Luxembourg 6 Portugal 1 United Kingdom 31 Third States United States 1 Mexico 1 Host country of insurance undertakings with head office in Spain operating under the right of establishment:

Spanish Insurance Undertakings Operating in other Member States through a Branch, 2017 European Union Germany 4 Belgium 3 France 4 Italy 7 Portugal 12 United Kingdom 5 Other Member States 19 Spanish insurance undertakings by legal form:

Number of Spanish Insurance Undertakings by Legal Form , 2017 Sociedades Anonimas 145 Mutuas 31 Mutualidades de Prevision Social 48 - Non-life Insurance

Gross written premiums amounted to EUR 34.9 billion in 2017. The non-life insurance sector represented about 54% of total premiums in 2017. Insurance penetration was 2.92% of GDP and insurance density was EUR 728 per capita.

Automobile insurance is the main line of business within the non-life insurance sector, with a market share of 31% in this segment. Health insurance is the second largest line by volume representing 28.2% of the non-life insurance premiums, followed by property insurance (21.1%).

In 2016, there were 637 non-life and composite insurers registered to write business under freedom of services arrangements.

The Spanish market is totally privatized with the exception of CESCE (Compania Espanola de Seguros de Credito a la Exportacion) and the Consorcio. CESCE is the specialist export credit agency of which the state, with a 50.25% stake, is the major shareholder along with various Spanish banks. The Consorcio is a dependency of the Ministry of Economy, which among other functions:

o operates as a direct insurer in the market for extraordinary risks involving natural perils and events of political nature, as insurer of last resort for obligatory motor third party, motor insurer of state-owned vehicles, insurer of nuclear risks o acts as the guarantee fund for motor hit-and-run and uninsured vehicle accidents and provides uninsured passenger accident cover for public transport vehicles o performs functions related to the insolvency of insurers

o assists with the administration of the export credit insurance premiums accepted by CESCE o maintains a register of compulsory insurances and handles the administration of the fire brigade charge under fire and multi-risk policies

The top-5 non-life insurers accounted for 38.45% of the market. The leading non-life insurers in 2016 were MAPFRE, SegurCaixa Adeslas, and Allianz. The leading non-life insurance companies in 2016 ranked by premium income are:

- Life Insurance

Gross written premiums amounted to EUR 29.6 billion in 2017. Insurance penetration was 2.53% of GDP and insurance density was EUR 630 per capita.

The life insurance market is dominated by individual pension contracts (74.7%), followed by individual risk business (10.5%).17

17 Data refer to 2016.

Fixed interest vehicles dominate life insurers’ portfolios, representing around 80% of the total. Public fixed interest investments exceed private, in 2016 they represented 58% and 21% of the whole, respectively. Historically, equities have accounted for a negligible proportion of insurers’ investments. The following table shows the invested assets (EUR mn) by life companies in different investments.

Historically banks have been the favored choice for most consumers when considering life insurance or investment products. According to data from ICEA (2016), banks continued to dominate the life sector with 72.56% of all premium income. Several banks such as BBVA, Santander and La Caixa have established their own insurance operations while others such as MAPFRE have gone into partnership with an existing office, in its case with various former Cajas de Ahorros and Bankia group.

There are no state-owned life insurance companies in Spain.

According to AXCO, 12.43% of the capital of Spanish insurers was in the hands of foreign companies in 2016. The country with the largest investment is the US (3.51%), followed by France (2.93%), and the Netherlands (2.43%).

The top-5 life insurers accounted for 58.26% of the market in 2016. Key participants in the life sector include VidaCaixa and Bansabadell Vida. The leading life insurance companies in 2016 ranked by premium income are:

The following table shows the largest groups and their member companies:

Group Member companies

Life insurers Non-life insurers Significant other group companies Ibercaja Vida (includes portfolio of Caja Badajoz Vida y Ibercaja Pensiones**, Ibercaja Gestion***, Ibercaja Ibercaja Group n/a Pensiones) Patrimonios****, Ibercaja Mediacion de Seguros***** VidaCaixa, CajaSol Vida y Pensiones, CajaCanarias Grupo Caixa CajaSol Seguros Generales, Can Salud CaixaBank Investment Group, La Caixa Vida y Pensiones, Banca Civica Vida y Pensiones Zurich Insurance Group and Banco de Sabadell Bansabadell Vida Sabadell Seguros Generales Sabadell Pensiones**

Zurich Vida MAPFRE Vida, BANKIA MAPFRE Vida, (now includes MAPFRE Familiar, MAPFRE Empresas, MAPFRE Global MAPFRE Aseval and Laietana Vida) CCM Vida y Pensiones, MAPFRE RE Risks, CatalunyaCaixa Seguros Generales Verti Bankinter Vida, Union del Duero Vida, Banco Bilbao Vizcaya Argentaria (BBVA) BBVA Seguros( includes Unnim Vida, Ascat) BBVA Seguros Generales BBVA

CatalunyaCaixa Vida

Grupo Santander Santander Seguros* Santander Seguros* Banco Santander

Allianz Allianz*, Allianz Popular Vida****** Allianz*, Fenix Directo, Amaya n/a Unicorp Vida, Aviva Vida y Pensiones SA, Caja Espana Aviva Vida, CXG Aviva, Cajamurcia Vida, Caja Granada Vida, n/a n/a Pelayo Mondiale Vida Generali Seguros*, Cajamar Seguros Generales, Europ Generali Generali Seguros*, Cajamar Vida n/a Assistance Seguros Catalana Occidente, Seguros Bilbao, Plus Ultra Grupo Catalana Occidente Plus Ultra Seguros Atradius, GCO Reaseguros Seguros, NorteHispana Market Developments

- The intention of Spanish insurance-related legislation is to be fully compliant with EU Directives. Lack of a governmental majority and repeated elections has, however, caused delays in passing legislation along with inertia caused by the uncertainty of political outcomes and by the focus on the next general elections. - Market participants are unhappy that the DGSFP is still part of the Ministry of Economy. - Primary motor third party premiums have not increased, mainly due to the two dominant market leaders persisting in a “price war” to gain market share. - Spain continues to develop its expertise as a growing hub for Latin America business, with Spain frequently being the preferred market for large capacity risks.

II. Supervisor

The supervision of insurance and reinsurance undertakings is carried out by the General Directorate of Insurance and Pensions Funds (DGSFP), which is an administrative body within the Ministry of Economy. The DGSFP is responsible for supervising and controlling the proper functioning of the insurance sector and of protecting policyholders, as well as pension funds members.

The DGSFP is responsible for the continuous financial supervision of insurance and reinsurance entities, through the verification of their financial statements, financial and economic analysis, regulatory compliance review, and the review and evaluation of risks and solvency. It is also responsible for the supervision of the operations and activity exercised by insurance and reinsurance undertakings, insurance intermediaries, and pension funds.

The DGSFP is financed through the State budget, no financing is required from the local insurance industry. In 2016, the budget assigned to the DGSFP amounted EUR 15.62 million. The managing director of the DGSFP is appointed by the Spanish Council of Ministers.

Insurance and reinsurance undertakings are regulated by the Act 20/2015 and the Royal Decree 1060/2015.

III. Cross-border Activity

Supervision of Spanish insurance undertakings

The Ministry of Economy shall exercise financial supervision on the Spanish insurance undertakings, including the activities carried out under the right of establishment and the freedom to provide services. In particular, financial supervision shall consist in the verification, regarding the undertaking’s overall operations, of the solvency status, the adequacy of technical provisions, and the availability of assets.

Spanish insurance undertakings that operate in other Member States under the right of establishment or the freedom to provide services shall inform the DGSFP on the amount of the premiums, claims, and commissions specified by type of regime under which they are operating and by Member State. This information shall be submitted separately for the life and non-life insurance sectors, and by line of business within each sector. The DGSFP shall send the information received from insurers, in aggregate form, to the competent supervisory authorities of the host Member States at their request.

Supervision of undertakings from other Member States

Undertakings with head office in other Member States may set up a branch in Spain under the right of establishment or may write insurance in Spain under the principle of freedom to provide services. The operations of such undertakings will be subject to supervision by the competent supervisory authority of the insurer’s Member State.

Still, insurance undertakings operating in Spain with head office in other Member States shall submit, in the same terms as the insurance undertakings with head office in Spain, all the documents required by the Ministry of Economy in order to verify their compliance with the Spanish regulation. For these purposes, they can be subject to inspection by the Spanish Ministry of Economy.

Supervision of undertakings from a third State

Insurance undertakings with head office in a third State may operate in Spain through the establishment of a branch. Such branch may carry out insurance activities in Spain subject to the provisions relating to the activity of Spanish insurance undertakings (except for those related to operations under the right of establishment or freedom to provide services, so that their risks and commitments must always be located and assumed in Spain).

For the purpose of calculating the solvency capital requirement and minimum capital requirement, only the operations carried out by the branch in Spain shall be taken into consideration.

IV. International Cooperation

The DGSFP shall collaborate with the supervisory authorities of the other Member States of the European Economic Area and shall exchange with them all the information that is necessary for the exercise of their functions in the field of insurance supervision.

Although the DGSFP is a member of the IAIS, it does not appear in the list of MMoU signatories of the IAIS.

V. Investigación Cooperativa entre Entidades Aseguradoras y Fondos de Pensiones (ICEA)

ICEA was founded in 1963 as the first association of insurance companies created in Spain. ICEA is the research arm of the Spanish insurance industry and is responsible for compiling and publishing all of the industry statistics. ICEA currently represents more than 200 insurance companies, accounting for 95% of the premiums written in Spain. It is financed by member annual fees based on their premium income.

VI. Asociación Empresarial del Seguro (UNESPA)

UNESPA is the Spanish Association of Insurers and Reinsurers. It is a non-profit private organization. The association was founded in 1977 and represents over 200 firms that as a whole make up 96% of this industry in Spain. These companies invoice €60 billion a year, which represents nearly 5.3% of Spain’s gross domestic product (GDP). The insurance industry handles an average of some 140,000 claims every day.

UNESPA’s mission is to represent its members when dealing with a wide range of institutions and organizations, both national and international, and ensure that the insurance industry point of view is duly conveyed. The association seeks to be present in all major social debates related to the insurance industry and to make known, in a constant way, the value and benefits that insurance generates.

The chief executive of UNESPA is a professional representative, elected by the General Assembly for a period of four years. All associate organizations form part of the general assembly and have the right to vote.

UNESPA is financed by its members who pay a fee based on the level of premium income of each company.

VII. Insurance Guarantee Scheme

The Consorcio de Compensacion de Seguros (CCS) is a publicly owned and managed legal entity. It is endowed with its own assets, separate from those of the State. The CCS is accountable to the DGSFP. The highest decision-making body of the CCS is its Board of Directors, chaired by the head of the DGSFP.

Although it does not operate an insurance guarantee scheme since it does not guarantee a level of protection, it does operate a general winding-up scheme that protects policyholders and beneficiaries of life and non-life insurers against the financial losses they might face should an insurer go into liquidation.

Once winding up has been formally declared, the CCS attempts to transfer the portfolio of the firm in difficulties to another firm. If this is not possible, it acquires all the contractual obligations at a price that is higher than the one policyholders and beneficiaries would receive if they were compensated once the

62 liquidation process was finalized.18 The CCS pays policyholders and beneficiaries a percentage of the value of their policies and claims. The tasks related to the general winding-up scheme have been performed by the CCS since 2002.

In addition to the general scheme, the CCS is in charge of three special guarantee schemes: travelers’ insurance, hunters’ liability insurance, and motorcar insurance. These schemes were created when the relevant types of insurance became compulsory. They provide compensation not only for uninsured risks or damages, but also if the insurer goes into liquidation. The schemes guarantee 100% of the compulsorily insured amounts.

The general winding-up scheme is funded on an ex-ante basis. The consumer protection functions of the CCS in the context of the liquidation of an insurer are funded through a 0.15% surcharge on the premiums of the insurance policy (except for life and export credit insurance). The surcharge is collected by the insurance companies, which then transfer the money to the CCS. This money is exclusively used for funding the uplift in the level of payments made to policyholders and beneficiaries and cover the winding- up expenses.19

All Spanish insurers, as well as EU-branches and non-EU insurers operating in Spain, are required to contribute to both the general and the special schemes (host state principle applies for financing). The policies issues by branches of insurance undertakings with their head office in another EU Member State and non-EU insurers, however are not covered by the schemes. In terms of protection, there are no eligibility criteria concerning the place of residence and the location of the risk (home state principle applies for protection). The risk is covered independently of where the policy has been purchased, as long as it has been sold by a company with headquarters in Spain. Portugal I. Characteristics of the Insurance Market

In 2017, total direct insurance premiums amounted to EUR 11.6 billion. Insurance penetration was 6% over GDP and insurance density amounted to EUR 1,127 per inhabitant.

In 2017, the total number of insurance companies operating in Portugal was 73. There were 57 companies licensed to operate in the Portuguese non-life insurance market and 30 in the life market, including composites. Regarding their legal form, 42 were limited liability companies, 1 was a mutual, and 30 were general agencies. In terms of ownership, 30 were branches of companies with head office in other Member States.

In 2017, there were 540 foreign companies operating under the freedom to provide services, of which 38 offered life-insurance products, 475 offered non-life insurance products, and 27 offered both life and non- life insurance products.

18 Therefore, in addition to providing policyholders and beneficiaries with upfront liquidity, the CCS can improve the payments they receive.

19 https://www.consorseguros.es/web/entidades-aseguradoras/primas-y-recargos/recargos-segun-ramos

Country of origin of the foreign companies operating in Portugal:

Country of destination of the Portuguese companies operating abroad:

The largest share of investments in the insurance sector is invested in bonds (70.3%), reaching a total of EUR 38.9 billion in 2017, of which EUR 13.8 billion corresponds to Portuguese public debt.

In terms of market concentration, the top 5 insurance companies operating in Portugal capture 64.16% of total gross written premiums in 2017.20

- Non-life Insurance

In 2017, non-life direct insurance premiums amounted to EUR 4.49 billion. Insurance penetration was 2.3% over GDP and insurance density amounted to EUR 437 per inhabitant.

The main share in non-life insurance activities was that of accidents and health, motor, and fire and other damage.

There are no state-owned insurance companies as such, but the state has an indirect participation in one insurer through its banking interests. The state, through Caixa Geral de Depositos, retains interest in Via Directa, giving it a non-life market share of just 1%.

The top-5 non-life insurers accounted for 64.01% of the market. The leading non-life insurance companies in 2017 ranked by premium income are:

20 Market share data is available at https://www.asf.com.pt/NR/exeres/A6E856FF-AD45-40DD-83C7- 8614A910D835.htm (see “Ranking of the Entities”).

- Life Insurance

In 2017, life direct insurance premiums amounted to EUR 7.09 billion. Insurance penetration was 3.7% over GDP and insurance density amounted to EUR 690 per inhabitant.

The main share in life insurance activities was that of the endowment insurance (50.5%), followed by the retirement saving plan (33.3%), term insurance contracts (12.55), and annuities contracts (2.8%).

Life insurer investments continue to favor government bonds (43%), followed by debt issued by private companies (31%). The following table shows the invested assets (EUR mn) by life companies in different investments:

The major Portuguese financial group Caixa Geral de Depositos (CGD) is government-controlled and previously held a 15% share in Fidelidade. The state, via CGD retains interest in another insurer, Via Directa, which does not operate in the life sector but does sell PMI online. The state still owns CGD, the savings bank, which is now the only state-controlled financial services business. CGD had previously owned insurers Caixa Seguros, Fidelidade, Multicare, and Cares, which were all privatized in 2013.

The top-5 life insurers accounted for 78.14% of the market in 2017. The largest life insurer with 32.9% of the market is Fidelidade. The leading life insurance companies in 2017 ranked by premium income are:

The following table shows the largest groups and their member companies:

Group Member companies

Life insurers Non-life insurers Significant other group companies

Grupo Novo Banco (GNB) GNB Vida GNB Seguros n/a

Grupo Banco Popular Eurovida Popular Seguros n/a

Grupo Banco Portugues de Investimento (BPI) BPI Vida e Pensoes n/a COSEC

Fosun International Ltd Fidelidade* Fidelidade* Via Directa, Multicare

Ageas (Millenniumbcp/Fosun International Ltd) Ocidental Vida, Ocidental Seguros, Medis

Banco Santander Portugal Santander Totta Vida Santander Totta Seguros n/a

Grupo Montepio Lusitania Vida Lusitania, N Seguros Finibanco Apollo Global Management Tranquilidade*, T-Vida, Acoreana* Tranquilidade*, LOGO, Acoreana* AdvanceCare Market Developments

- In May 2018, it was announced that the proposed acquisition of the insurers Lusitania, LusitaniaVida and NSeguros from the Portuguese financial group Associacao Mutualista Montepio by CEFC China Energy Company Limited had been rejected by the ASF, on the grounds that CEFC had provided insufficient information to the ASF about the proposed transaction. - On November 2018, the government granted the ASF powers over the troubled Portuguese financial group Associacao Mutualista Montepio, owner of insurers Lusitania, LusitaniaVida and NSeguros. The ASF will have special audit and governance review powers over the mutual. - In recent years, the number of insurance companies (both life and non-life) established in Portugal decreased, mainly as a result of mergers but also due to branches of foreign insurers ceasing to trade in the market or continuing to trade but within the EU freedom to provide services provisions. - Non-life market results were impacted by forest fires in June and October 2017, which together led to the deaths of over 100 people, prompting the resignation of the country’s interior minister. - In 2017, Tranquilidade merged with Acoreana, Logo and T-Vida, its fellow subsidiaries of the US- based Apollo Global Management group, under the name of Seguradoras Unidas SA, reinforcing

its position as the second largest insurer in Portugal behind Fidelidade, which remains the clear market leader. This transaction has increased concentration at the top end of the market. - In October 2017, it was announced that the life and non-life businesses of Groupama Seguros were to be acquired by China Tianying Inc, a group specializing in waste disposal. It is understood that regulatory approval for the transaction was granted in early 2018. - In September 2017, it was rumored that the Italian Generali group was looking to sell its operations in Portugal as part of a wider-scale disposal of assets. Market sources suggest that this decision has since been reversed. - Rumors persist within the non-life market about possible further consolidation, although some sources view any such consolidation as unlikely at the top end of the market.

II. Supervisor

The Autoridade de Supervisão de Seguros e Fundos de Pensões (ASF) is the national authority responsible for the regulation and supervision of the insurance, reinsurance, pension funds, and insurance mediation. Before 2015, it was known as the Portuguese Insurance Institute (ISP).

The ASF is a legal person under public law, with the nature of an independent administrative entity, provided with administrative, financial and managerial autonomy and its own assets.

The ASF’s aims to ensure the proper functioning of the insurance and pension funds market in Portugal, in order to contribute to guarantee the protection of policyholders, insured persons, members and beneficiaries. This mission is achieved through the promotion of stability and financial soundness of all institutions under its supervision.

ASF bodies are the management board, the advisory council, and the audit committee.

- The management board consists of the president and up to four other members, who are appointed by the member of the Government responsible for the area of finance. - The advisory council consists of the president of the ASF’s management board, a representative of the Regional Government of the Azores, a representative of the Regional Government of Madeira, a member of the board of directors of the Bank of Portugal, a member of the board of directors of the CMVM, the general director of the DGC, the president of a consumer protection association, the chairman of an insurance association, the president of a pension fund association, the president of an insurance intermediaries’ association, a representative of the Social Economy, and up to three individuals of recognized reputation, independence and competence within the scope of the ASF appointed by the Government. - The audit committee consists of a president and two other members, appointed by the member of the Government responsible for the area of finance.

The ASF is funded through contributions and fees to be paid by the supervised entities, the amount of which is established by the member of the Government responsible for the area of finance. The current levy on insurers is set at 0.048% for life insurers and 0.242% for non-life insurers.

III. Cross-border Activity

The ASF is the competent authority for the supervision of:

- the activity of insurance and reinsurance undertakings established in Portugal, including their activity performed in territory of another Member State by its branches or carried out on a freedom of services basis, as well as the activity carried out in a territory outside the European Union. - the activity carried out in Portugal by branches of insurance and reinsurance undertakings from a third country. - the compliance with legal, regulatory and administrative provisions applicable to insurance and reinsurance undertakings with head office in another Member State operating in Portugal under the freedom of establishment or free provision of services. Notwithstanding the exclusive competence of the home supervisory authority for financial supervision.

IV. Associacao Portuguesa de Seguradores (APS)

The Portuguese Association of Insurers, founded in 1982, is a non-profit association established to defend and promote the interests of insurance and reinsurance companies. APS has 74 members and represents more than 99% of the insurance market, both in terms of turnover and total employees. A key part of APS’s work is the development of technical and statistical information.

V. Insurance Guarantee Scheme

Portugal does not have a general insurance guarantee scheme in place. However, it has a workers’ compensation fund and a motor guarantee fund.

The Workers’ Accidents Compensation Fund (Fundo de Acidentes de Trabalho, FAT) provides protection in the event of non-insurance of a worker by their employer. The FAT is funded through a percentage charged by insurance companies to policyholders when premiums are processed in the category “Accidents at Work”. At present, the levy is set at 0.15% on salaries insured.

The Motor Guarantee Fund (Fundo de Garantia Automovel, FGA) is a public autonomous fund managed by the ASF, created to fulfil compensations due in consequence of a road traffic accident. The FGA pays compensations for material and bodily injuries caused by an uninsured vehicle. The FGA also pays compensation, under certain conditions provided by law, when the responsible for the accident is untraced. The FGA also covers motor liabilities in the event of insolvency of an insurer writing that class. The FGA is funded through contributions set at 2.5% of the direct third party obligatory premium and 0.21% of all motor premiums written, both amounts charged to the insured as part of the premium.

An insurance undertaking with head office in another Member State operating in Portugal through branches, shall contribute to any scheme designed to ensure the payment of indemnities to policyholders and injured third parties, ensuring the contributions to FAT and FGA.

Greece I. Characteristics of the Insurance Market

The Greek insurance market comprises 18 non-life insurers, 3 life insurers and 18 undertakings that still offer both life and non-life insurances.21

In 2017, total insurance premiums amounted to EUR 3,785.28 million. About 49.43% of the premiums derived from life insurance policies. Insurance penetration was 2.13% of GDP and insurance density amounted to $381.91 per capita.

Investments on government bonds continue to be by far the most preferred investment instrument. The following table shows the invested assets (EUR mn) by life and non-life companies in different investments:

- Non-life Insurance

Direct written premiums in the Greek non-life market amounted to EUR 1.91 billion in 2017. Insurance penetration was 1.08% of GDP and insurance density amounted to $193.12 per inhabitant.

The non-life insurance market is dominated by the motor business, representing just over 53% of all non- life premiums written in 2017. Property is the next most important line of business accounting for 22.3% of the market. Liability insurance is largely underdeveloped and is a small class in Greece.

21 There are no longer officially published statistics on the ranking of companies by premium income. Therefore, there are no official data on market concentration. The numbers reported in this section come from Axco.

The top-5 non-life insurers accounted for 39.16% of the market in 2017. The leading non-life insurance companies in 2017 ranked by premium income are:

- Life Insurance

Total life market premium income in 2017 was EUR 1.87 billion. Insurance penetration was 1.05% of GDP and insurance density was $188.79 per capita. Life and health penetration are low because of the historically high level of public protection which led to people looking to the state for support. Substantial cuts in government expenditure in recent years following the debt crisis have created a difficult environment. The industry is cautiously optimistic that the population will realize that state support is

73 reducing dramatically and, given a gradually improving economy, will lead to growth in self-provision via insurance instruments.

Traditional products accounted for 73% of the life insurance business.

There is no state-owned life insurance company. The government still has indirect involvement in the market through the participation it has retained in one major bank (NBG) that owns an insurance company. Ethniki is currently owned by the NBG, which is 15% owned by the government.

Eight of the top-10 players are branches or subsidiaries of highly rated foreign insurers, except for Ethniki (currently supported by NBG) and AlphaLife (owned by the Alpha Bank Group Co).

The top-5 life insurance companies accounted for 75.30% of the market in 2016. The leading life insurance companies in 2016 ranked by premium income are:

The following table shows the largest groups and their member companies:

Group Member companies

Life insurers Non-life insurers Significant other group companies National Bank of Greece Ethniki Hellenic Insurance* Ethniki* Ethniki Asset Management (NBG)** NN Group NN Hellas, NN Life NN Greece General Insurance Co SA Mutual Fund Management Co

NN Bank NV Greece

MetLife MetLife n/a Interamerican Property and Casualty Athinaiki Mediclinic, MediFirst Medical Centre, Intertrust (mutual funds), Achmea Interamerican Life Insurance Co SA, Interamerican Interamerican Road Assistance Assistance, Fairfax Group (80%), Eurolife ERB Life SA Eurolife ERB General SA Eurobank Ergasias SA Eurobank Ergasias SA (20%) ERGO ATE (formerly Agrotiki) Life ERGO General, ATE Insurance n/a

Allianz Allianz Hellas* Allianz Hellas* n/a

AXA Group AXA * AXA Insurance* Inter Partner Assistance Groupama Groupama Phoenix* Groupama Phoenix* n/a Market Developments

- The operating licenses of two well-known life and health insurers (ASPIS Pronoia AEGA and AEZ and Commercial Value SA) were revoked at the beginning of the Greek financial crisis in 2009/2010. This left thousands of Greek policyholders exposed without cover and facing uncertainty regarding the premiums they had already paid. In response, in an effort to better safeguard the interests of the insured, the PLIGF was established. - Less than two years after the PLIGF was established, it was called to settle the claims of insureds of VDV Leben International AEAZ, an insurer whose license was revoked on 2011. The insurer had no major assets and was subject to liquidation. The PLIGF was responsible for paying all verified claims arising from the insurance policies of the insolvent insurer. As a result, the PLIGF paid EUR 16.7 million, representing 47% of the total claims verified. - In March 2018, the sale agreement between the NBG and Exin Financial Services Holdings BV (Exin) for a 75% share of Ethniki, the largest insurer in Greece was terminated. NBG declared that

Exin failed to fulfil the conditions of the sale agreement. In June 2018 the bank announced that Gongbao had submitted a binding offer to acquire Ethniki Insurance. However, NBG ended it talks with Shangai Gongbao Investment about the possible sale of Ethniki in October 2018. Despite some suggestions of possible alternative bidders, it was reported in January 2019 that NBG had been granted an extension until the end of 2020 of the deadline set by the EU for the sale to be completed.

II. Supervisor

The Bank of Greece assumed the supervision of the private insurance system on 1 December 2010, after the abolition of the Private Insurance Supervision Committee (PISC). The supervisory duties are carried out by the Department of Private Insurance Supervision (DEIA).

As the supervisory authority of the private insurance sector, the Bank of Greece aims at:

- enhancing protection of all policyholders and insurance beneficiaries - ensuring smooth operation of and fostering consumers’ confidence in the private insurance market - safeguarding financial stability in Greece and in the countries where Greek insurers operate

Supervision is funded by a variable levy on insurance companies.

III. Cross-border Activity

The DEIA is responsible for prudential supervision of Greek insurance undertakings with respect to their total business in Greece and in EU/EEA Member States, through a branch or under freedom of services (FOS). Subject to the prudential supervision of the Bank of Greece are also the Greek branches of insurance undertakings incorporated in non-EU/EEA Member States.

It is also responsible for monitoring compliance of EU/EEA branches/FOS operating in Greece with the Greek regulatory framework on market conduct, in cooperation with the relevant home supervisory authorities. Prudential regulation and financial conduct are supervised by the home country’s regulator. If the Greek regulator has any concerns regarding the financial conduct of a foreign insurer operating in Greece, it is likely to contact the regulator of the respective foreign country.

IV. Hellenic Association of Insurance Companies (EAEE)

The EAEE, founded in 1907, is the accredited and representative body of the Greek insurance industry. Whilst membership is not mandatory, almost all companies are members. It comprises 48 members, accounting for over 95% of the premiums in the Greek market.

Its main goals are to:

- encourage and develop private insurance by all legal means - protect and promote the moral, professional and financial interests of its members - keep members fully informed regarding matters that concern them - represent its members in local public bodies, international organizations and the EU - follow up on the implementation and compliance with the laws in force - create conditions of fair competition in the market

V. Insurance Guarantee Scheme

Claims arising from compulsory third-party liability insurance are covered by the Auxiliary Fund. Claims arising from life assurance are handled by the Private Insurance Guarantee Fund.

The Auxiliary Fund is responsible to fulfill the demands of injured parties in the following cases:

- when the vehicle is unidentified - when the insurance company of the vehicle that caused the accident is insolvent or has had its license revoked - when the accident involves an uninsured vehicle

All insurers that assume the risk of third-party liability motor insurance must participate in the Auxiliary Fund. Contributions are set at 6% of the gross written premiums, split 70% from the insurer and 30% from the insured. There is also a one-off MGF enrollment fee of EUR 50,000 for insurers writing motor third- party liability and a minimum annual contribution of EUR 10,000.

The Private Life Insurance Guarantee Fund (PLIGF) is controlled and supervised by the Bank of Greece. Its object is to ensure the maintenance or transfer of the life insurance portfolio of any insurance undertaking that is in the process of liquidation to another insurance undertaking and, if this proves impossible, the termination of the life insurance policies and payment of an amount corresponding to the value of such policies, as well as payment of an amount for outstanding losses and payable benefits. The Fund was established for the protection of life insurance policyholders in the event of bankruptcy or license revocation of their life insurance company.

The following entities shall become mandatorily members of the fund:

- all insurance undertakings having their registered office in Greece and carrying out life insurance business - branches in Greece of insurance undertakings of third countries carrying out life insurance business - branches in Greece of insurance undertakings of EU and EEA countries carrying out life insurance business, provided that they are not already covered by similar guarantee funds in their country of establishment - undertakings active in Greece under the freedom to provide services, provided that they are not already covered by similar guarantee funds in their country of establishment

The coverage provided shall be equal to 100% of each life insurance claim, up to EUR 30,000 per life insurance beneficiary for benefits on maturity and redemptions of insurance policies, and up to EU 60,000 for death and permanent total disability compensations.

With a view to the achievement of the object of the PLIGF, a contribution in its favor is imposed, which shall be specified by decision of the Bank of Greece at up to 1.5% of total annual written life insurance premiums. Half of this contribution shall be incurred by the insurance undertakings and the other half by the insured. The levy varies according to the type of business:

- Life insurance (except annuities but including additional benefits): 1.5% - Annuities: 1% - Life insurance linked to investment (unit-linked): 0.8%

- Health insurance: 1.5% - Capitalization: 1.5% - Management of group pension funds: 0.3%

The PLIGF is managed by a Management Committee composed of five members. The president of the management committee is appointed by the Bank of Greece. The other four members are elected by the meeting of members.

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